MIRA INFORM REPORT

Report Date :

31.10.2007

IDENTIFICATION DETAILS

Name :	HINDUSTAN PETROLEUM CORPORATION LIMITED
Registered Office :	Petroleum House, 17, Janshedji Tata Road, Mumbai – 400020, Maharashtra
Country :	India
Financials (as on) :	31.03.2007
Date of Incorporation :	05.07.1952
Com. Reg. No.:	11-8858
CIN No.: [Company Identification No.]	L23201MH1952PLC008858
TAN No.: [Tax Deduction & Collection Account No.]	MUM07045D
PAN No.: [Permanent Account No.]	AAACH11118B
Legal Form :	Public Limited Liability Company. The company’s shares are listed on the stock exchanges.
Line of Business :	Manufacturing and Marketing of Petroleum Fuel and Lube Products, Lubricating Oils, Textile Auxiliaries, Hydraulic Brake Fluid, Insecticides and Greases

RATING & COMMENTS

MIRA’s Rating :

Aa

RATING		STATUS	PROPOSED CREDIT LINE
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large

Maximum Credit Limit :	USD 383946000
Status :	Excellent
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a globally renowned Fortune 500 Company, owned by the Government of India, engaged in refining and marketing of Petroleum Products. Financial position of the company is good. Payments are correct and as per commitments. The company can be considered good for normal business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	Petroleum House, 17 Jamshedji Tata Road, Mumbai – 400 020, Maharashtra, India
Tel. No.:	91-22-2202 6151
Fax No.:	91-22-2287 2992/22841573/22872992
E-Mail :	corphqo@hpcl.co.in
Website :	http://www.hindpetro.com http://www.hindustanpetroleum.com
Telex :	82414 / 85096
Marketing Office :	Hindustan Bhavan, 8, Shoorji Vallabhdas Marg, P. B. No. 155, Ballard Estate, Mumbai – 400 038, Maharashtra, India
Tel. No.:	91-22-22618031
Fax No.:	91-22-22611822
Refinery :	Mumbai B.D. Patil Marg, Chembur, Mumbai – 400 074, Maharashtra, India Vishakhapatnam Post Box No. 15, Vishakhapatnam – 530 001, Andhra Pradesh, India
Zonal Offices :	East Zone 6 Church Lane, Post Box No. 146, Kolkata – 700 001, West Bengal, India West Zone R & C Building, Sir J. J. Road, Byculla, Mumbai – 400 008, Maharashtra, India North Zone 6^th & 7^th Floor, Core 1 & 2, North Tower, Scope Minar, Laxmi Nagar, New Delhi – 110 001, India South Zone Thalamuthu Natarajan Building, 4^th Floor, 8 Gandhi Irwin Road, Post Box No. 3045, Egmore, Chennai – 600 008, Tamil Nadu, India

DIRECTORS

Name :	Mr. M. B. Lal
Designation :	Chairman and Managing Director
Qualification :	B.E. (Chem), PGDBM (IIM Ahmedabad)
Other Directorship :	GGSRL, HINCOL, PIL, Bhagyanagar Gas Limited
Name :	Mr. D. S. Mathur
Designation :	Director [Refineries] [Till 31.05.2005]
Qualification :	B.Tech, M.Sc, PGDPE
Other Directorship :	GGSRL
Name :	Mr. Arun Balakrishnan
Designation :	Director [Human Resources]
Qualification :	B.E.(Chem.), PGDBM (IIM) Bangalore
Other Directorship :	HINCOL, Prize Petroleum Company Limited, SALPG Company Private Limited
Name :	Mr. M. S. Srinivasan
Designation :	Director [Till 20.06.2005]
Qualification :	B.Tech (Civil), Master of Public Administratin, IAS
Other Directorship :	IOC, BPCL
Name :	Mr. T. L. Sankar
Designation :	Director
Qualification :	M.Sc. (Chemistry), MA (Dev.Eco.), IAS
Other Directorship :	Rain Calcining Limited, KSK Energy Ventures Limited, GGSRL, Delhi Power Company Limited, Small Scale Sustainable Infrastructure Development Board
Name :	Mr. Raja G. Kulkarni
Designation :	Director [Till 02.03.2006]
Qualification :	M.A.(Economics)
Name :	Mr. Rajesh V. Shah
Designation :	Director
Qualification :	Degree in Mathematics, MBA
Other Directorship :	Mukand Limited, Mukand Engineers Limited, Mukand International Limited, Fusion Investments and Financial Services Limited, Catalyst Finance Limited, Conquest Investments and Finance Limited, Kalyani Mukand Limited, Bengal Port Limited, Jeewan Limited, India Thermal Power Limited, ONGC
Name :	Mr. P. K. Sinha
Designation :	Director [From 01.03.2006]
Name :	Mr. Prabh Das
Designation :	Director [From 03.05.2005]
Name :	Mr. C. Ramulu
Designation :	Director [Finance] [from 14.08.2003]
Qualification :	CA, ACS, MBA
Other Directorship :	MRPL, PIL, Petronet MHB Limited, Prize Petroleum Company Limited, GGSRL, HINCOL, SALPG Company Private Limited
Name :	Mr. C. B. Singh
Designation :	Director [Till 28.02.2006]
Name :	Mr. S. Roy Choudhury
Designation :	Director – Marketing
Name :	Mr. M. Nandagopal
Designation :	Director
Qualification :	B.Sc.(Agriculture)
Other Directorship :	Mohan Breweries and Distilleries Limited, Thirumugal Mills Limited, Artos Breweries Limited, S V Sugar Mills Limited, Vestas RRB India Limited, Mira Textiles and Industries (India) Limited, Global Housing Finance Corporation Limited, Binny Engineering Limited, Mysore Fruit Products Limited, Clean Power Limited, Sagar Sugars and Allied Products Limited, Binny Limited
Name :	Mr. I. M. Pandey
Designation :	Director [From 09.12.2005]
Name :	Mr. M. A. Tankiwala
Designation :	Director – Refineries [From 01.06.2005]
Name :	Mr. S. K. Mukherjee
Designation :	Executive Director - Safety, Health & Environment
Name :	Mr. K. Murali
Designation :	Executive Director - R & D
Name :	Mr. S. P. Chaudhry
Designation :	Executive Director- Retail
Name :	Mr. S. K. Biswas
Designation :	Executive Director - Projects & Pipelines
Name :	Mr. A. K. Bhide
Designation :	Executive Director - Corporate Finance
Name :	Mr. G. A. Shirwaikar
Designation :	Executive Director – LPG
Name :	Mr. V. Vizia Saradhi
Designation :	Executive Director - Industrial Relations
Name :	Mr. S. V. Sahni
Designation :	Executive Director-Central Engineering(Refineries)
Name :	Mr. D. K. Deshpande
Designation :	Executive Director- Mumbai Refinery
Name :	Mr. K. R. Shankaran
Designation :	Executive Director *
Name :	Mr. K. S. R. Prasad
Designation :	Executive Director - Internal Audit & JVC’s
Name :	Mr. A. B. Sathe
Designation :	Executive Director- International Trade & Supplies
Name :	Ms. Nishi Vasudeva
Designation :	Executive Director – IT & ERP
Name :	Mr. B. Mukherjee
Designation :	Executive Director- HRD
Name :	Mr. A. S. Rao
Designation :	Executive Director - Visakh Refinery

KEY EXECUTIVES

Name :	Mr. B. R. Mandal
Designation :	Chief Vigilance Officer
Name :	Mr. N. R. Narayanan
Designation :	Company Secretary
Name :	Mr. A. S. Tulaskar
Designation :	General Manager – RCD
Name :	Mr. S. M. Palav
Designation :	General Manager- Information Technology (Marketing)
Name :	Mr. A. B. Thosar
Designation :	General Manager- Pipelines
Name :	Mr. O. P. Pradhan
Designation :	General Manager - Corporate Planning & Strategy
Name :	Mr. R. Sudhakara Rao
Designation :	General Manager- Lubes
Name :	Mr. P. A. B. Raju
Designation :	General Manager - Operations, Visakh Refinery
Name :	Mr. B. K. Namdeo
Designation :	General Manager- Central Engineering (Refineries)
Name :	Mr. S. P. Gupta
Designation :	Financial Controller
Name :	Mr. K. V. Rao
Designation :	General Manager- Finance, Visakh Refinery
Name :	Mr. B. Gururajan
Designation :	General Manager - South Zone
Name :	Mr. M. S. Damle
Designation :	General Manager-West Zone
Name :	Mr. A. B. Pai
Designation :	General Manager - East Zone
Name :	Mr. Sandeep Joseph
Designation :	General Manager - HR (Special Activities)
Name :	Mr. G. Hariharan
Designation :	General Manager- Legal
Name :	Mr. Y. KGawali
Designation :	General Manager-O & D
Name :	Mr. S. C. Mehta
Designation :	General Manager-Operations, Mumbai Refinery
Name :	Mr. S. K. Savla
Designation :	General Manager- Engineering & Projects
Name :	Mr. Rakesh Kumar
Designation :	General Manager-Treasury, Payroll & Reimbursement
Name :	Mr. S. Y. Narvekar
Designation :	General Manager- Industrial & Consumer Sales
Name :	Mr. C. S. Krishnaswamy
Designation :	General Manager - Quality Control & R&D
Name :	Mr. D. M. Sabale
Designation :	General Manager-Safety Health and Environment
Name :	Mr. P. Rajendran
Designation :	Genera! Manager - M R A & P
Name :	Mr. S. T. Sathiavageeswaran
Designation :	General Manager - ERP
Name :	Mr. M. V. Sreeram
Designation :	General Manager-IT(Corporate)
Name :	Mr. R. Ganesan
Designation :	General Manager-Tax
Name :	Mr. V. S. Rao
Designation :	General Manager-Technical, VR
Name :	Mr. D. Khota
Designation :	General Manager- Project ACE
Name :	Mr. V. Jagannathan
Designation :	General Manager - Spl. Assignment, VR
Name :	Mr. K. Srinivasan
Designation :	General Manager-Projects, MR
Name :	Mr. R. M. N. Marar
Designation :	General Manager- Projects, VR
Name :	Mr. T. K. Kalyanaraman
Designation :	General Manager
Name :	Mr. A. V. Sarma
Designation :	Genera! Manager
Name :	Mr. R. K. Gupta
Designation :	General Manager
Name :	Mr. Rajan K. Pillai
Designation :	General Manager
Name :	Mr. S. P. Singh
Designation :	Deputy General Manager - Aviation
Name :	Mr. Ajit Singh
Designation :	Deputy General Manager (I/C)- Delhi Coordination Office
Name :	Mr. Rakesh Misri
Designation :	Deputy General Manager (I/C), North Zone
Name :	Mr. L. M. Motwani
Designation :	Deputy General Manager - PR&CC

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

Names of Shareholders	No. of Shares	Percentage of Holding
President of India	173076750	51.01
Financial Institutions	59329055	16.28
FIIs / OCBs	53018946	23.26
Banks	1033322	0.43
Mutual Funds	24139353	1.63
NRIs	1185976	0.31
Employees	435240	0.14
Others	27111358	6.95
Total	339330000	100.00

BUSINESS DETAILS

Line of Business :

Manufacturing and Marketing of Petroleum Fuel and Lube Products, Lubricating Oils, Textile Auxiliaries, Hydraulic Brake Fluid, Insecticides and Greases.

Products:

Item Code No. (ITC Code)	27.10
Product Description	Bulk Petroleum Products
Item Code No. (ITC Code)	271000.41/61
Product Description	Lubricants
Item Code No. (ITC Code)	290122.00
Product Description	Propylene

Exports to :

Naphtha, Sri Lanka, Malaysia, Saudi Arabia, Singapore, Japan, Bangladesh and Nepal

Imports from :

Saudi Arabia and Abu Dhabi [Crude Oil]

Terms :

Selling :

L/C, Cash or Credit (30 days)

Purchasing :

L/C or Credit (30 days)

GENERAL INFORMATION

Suppliers :

Ø Pyro Electric Instruments

Ø S.K.M.L. Enterprises

Ø Newage Industries

Ø M. Sagar

Ø Kevin Enterprises Private Limited

Ø Sri Manoj Electrical Works

Ø K.V. Fire Chemicals, India

Ø Sri Trinadha Electrical Works,

Ø Joseph Leslie Drager Manufacturing Private Limited

Ø Levcon Institute Private Limited

Ø Gaskets (India) Private Limited

Ø Chemtrols Engineering Limited

Ø Exprotecta

Ø Remi Process Plant & Machinery

Ø Shanmuka Engineering Works

Ø Sri Balaji Associates

Ø Eby Fasteners

Ø Packings & Jointings Gasket

Ø CDC Carboline India Private Limited

Ø Southern Gasket Products

1. K. Dey & Company

Ø IGP Engineers Private Limited

Ø Hydro-Pneumatics

Ø Madras Industrial Products

Ø Dembla Valves Private Limited

Ø Goodrich Gasket (Private) Limited

Ø H. Guru Industries

Ø Sebim Valves India Private Limited

Ø A.N. Instruments Private Limited

Ø Virgo Engineers Limited

Ø Jayalakshmi Engineering Con

Ø Floway Valves Private Limited

Ø Precision Engineering Works

Ø J R U Controls Private Limited

Ø Coastal Ammonia Private Limited

Ø Gujarat Infrapipes Private Limited

Ø Associated Suppliers

Ø M.S. Fittings Manufacturing

Ø Prime Mover Governor Services

Ø A.V. Valves Limited

Ø Sriram & Company

Ø Econo Valves Private Limited

Ø Xtechs

Ø Chaudhry Hammer Works Private Limited

Ø Coromandel Paints & Chemicals

Ø Flash Forge Private Limited

Ø Geetha Enterprises

Ø Swaran Singh & Company

Ø Rao Welding Works

Ø President Engineering Works

Ø Leak Stop Experts

Ø Multithread Fasteners

Ø Precision Management Council

Ø AEP Company

Ø Ncon Turbo Tech (Private) Limited

Ø PTD Fasteners Private Limited

Ø Gangotri Turbo Tech Engineering

Ø Nireka Engineering & Company Private Limited,

Ø Modern Electrical Works

Ø Mahalakshmi Engineers

Ø Sri Gajalakshmi Industries

Ø Pavani Enterprises

Ø Voltamp Transformers Private Limited

Ø Gopal Engineering Works

Ø Waaree Instruments Limited

Ø Pravasi Enterprises

Ø Ganesh Engineering Works

Ø Mastan Engineering Works

Ø Sabari Engineering Contract

Ø S Tas Engineering Company Private Limited

Ø Usha Engineering Works

Ø Technika

Ø Sri Sanari Electrical & Engineering

Ø Global Enterprises

Ø Shiva Jyothi Enterprises

Ø M. Someswara Rao

Ø Sri Ganesh Ele & Rewinding

Ø Ramakrishna Electrical Wind

Ø S. Venkata Rao

Ø Prathyusha Safety Manufacturing Company

Ø United Electrical & Rewinding

Ø Pipefit Engineers

Ø S.K. Ahmed

Ø Sohan Engineering Enterprises

Ø Inmacro

Ø Cartal Technical Services

Customers :

Retailers, End Users and OEM’s

No. of Employees :

11088

Bankers :

² State Bank of India, Mumbai, Maharashtra, India

² Union Bank of India, Mumbai, Maharashtra, India

² Punjab National Bank, Mumbai, Maharashtra, India

² Bank of Baroda, Mumbai, Maharashtra, India

² Standard Chartered Bank, Mumbai, Maharashtra, India

² Bank of India, Mumbai, Maharashtra, India

² Citibank N.A., Mumbai, Maharashtra, India

² Corporation Bank, Mumbai, Maharashtra, India

² ICICI Bank

² HDFC Bank

Facilities :

Particulars	31.03.2007 Rs. in Millions
Secured Loans
i. Collateral borrowing and landing obligation (secured by pledge on oil bonds) ii. Overdrafts from Banks (secured by hypothecation of stock-in-trade)	46
Unsecured Loans
Fixed Deposits Clean loans from banks (due for repayment within one year – Rs.58300.000 millions) Short term loans from banks (repayable in foreign currency) (due for repayment within one year – Rs.13568.700millions) Term loan from oil industry development board (due for repayment within one year Rs.2000.000 millions) syndicated loans from foreign banks (repayable in foreign currency) (due for repayment within one year – Rs. Nil)

Banking Relations :	Good
Auditors :
Name :	Statutory Auditors N.M. Raiji & Company Chartered Accountants Sudit K. Parekh & Company Chartered Accountants Mumbai Branch Auditors B.V. Rao & Company Chartered Accountants Visakhapatnam
Associates :	² Mangalore Refinery and Petrochemicals Limited ² Hindustan Coals Limited ² Petronet MHB Limited ² Visakhapatnam Power Project ² Punjab Refinery Project ² Prize Petroleum Company Limited ² South Asia LPG Company Private Limited ² Gas Limited ² Bhagyanagar Gas Limited
Subsidiaries :	Guru Gobind Singh Refineries Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
75000	Preference shares	Rs.100/- each	Rs.7.500 millions
349250000	Equity Shares	Rs.10/- each	Rs.3492.500 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
339330000	Equity Shares	Rs.10//- each	Rs.3393.300 millions
	Less: calls unpaid by other		Rs.3.800 millions
	Total		Rs.3389.500millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2007	31.03.2006	31.03.2005
SHAREHOLDERS FUNDS
1] Share Capital		3389.500	3389.400	3389.300
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		92597.000	83968.000	81019.200
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		95986.500	87357.400	84408.500
LOAN FUNDS
1] Secured Loans		10054.800	14861.600	3199.100
2] Unsecured Loans		95120.500	51776.700	18654.400
TOTAL BORROWING		105175.300	66638.300	21853.500
DEFERRED TAX LIABILITIES		14209.000	13844.400	13747.500
TOTAL		215370.800	167840.100	120009.500
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		88208.400	73374.000	69436.400
Capital work-in-progress		42435.600	23638.800	7868.400
INVESTMENT		71274.700	40276.400	17568.400
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	80984.000	78102.900	56822.100
	Sundry Debtors	15777.800	13922.600	10486.100
	Cash & Bank Balances	867.900	425.900	2016.300
	Other Current Assets	923.300	113.800	3.500
	Loans & Advances	16094.000	17534.600	25695.000
Total Current Assets		114647.000	110099.800	95023.000
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	88917.700	73947.400	61778.200
	Provisions	12277.200	5601.500	8108.500
Total Current Liabilities		101194.900	79548.900	69886.700
Net Current Assets		13452.100	30550.900	25136.300
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		215370.800	167840.100	120009.500

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2007	31.03.2006	31.03.2005
Sales Turnover		835711.400	727753.300	602231.400
Other Income		61546.300
Total Income		897257.700
Profit/(Loss) Before Tax		19611.100	2851.000	16406.000
Provision for Taxation		3899.400	[1205.300]	3632.700
Profit/(Loss) After Tax		15711.700	4056.300	12773.300
Export Value :		NA	32713.900	19435.100
Import Value		NA	200628.200	139481.600
Expenditures :
	Administrative Expenses	15647.200	14377.900	24693.400
	Raw Material Consumed	358167.900	254502.900	544190.800
	Purchases made for re-sale	468502.200	421781.200	0.000
	Packages Consumed	1051.100	959.900	1143.400
	Excise duty on inventory differential	454.000	1770.000	53505.700
	Salaries, Wages, Bonus, etc.	7294.200	6414.900	7130.100
	Depreciation & Amortization	7040.000	6902.300	6583.800
	Other Expenditure	4430.900	1883.000	19873.400
Total Expenditure		862587.500	708592.100	657120.600

QUARTERLY RESULTS

PARTICULARS	30.06.2007 1^st Quarterly
Sales Turnover	218817.000
Other Income	3350.900
Total Income	222167.900
Total Expenditure	220102.400
Operating Profit	2065.500
Interest	1333.500
Gross Profit	732.000
Depreciation	1798.100
Tax	15.000
Reported PAT	(869.3000)

KEY RATIOS

PARTICULARS	31.03.2007	31.03.2006	31.03.2005
Debt-Equity Ratio	0.94	0.52	0.24
Long Term Debt-Equity Ratio	0.71	0.27	0.04
Current Ratio	0.90	0.94	0.91
TURNOVER RATIOS
Fixed Assets	6.71	5.99	5.52
Inventory	12.28	11.49	11.85
Debtors	65.75	63.49	64.11
Interest Cover Ratio	5.65	2.80	21.10
Operating Profit Margin(%)	3.17	1.46	3.62
Profit Before Interest And Tax Margin(%)	2.45	0.57	2.62
Cash Profit Margin(%)	2.33	1.41	2.95
Adjusted Net Profit Margin(%)	1.61	0.52	1.94
Return On Capital Employed(%)	13.46	3.41	17.16
Return On Net Worth(%)	17.14	4.72	15.79

LOCAL AGENCY FURTHER INFORMATION

History

The company was incorporated on 5^th July, 1952 at Mumbai in Maharashtra under the name & style of Standard Vacuum Refining Company of India Limited having Company Registration Number 8858.

The name of the company was changed to ESSO Standard Refining Company of India Limited on 31^st March 1962.

Subsequently the name of the company was changed to Hindustan Petroleum Corporation Limited w. e. f. 15^th July 1974 by virtue of Lube India and ESSO Standard Refining Company of India Limited Amalgamation Order 1974 dated 12^th July 1974.

The Caltex undertaking were also nationalised in 1976, which were subsequently merged with the company in 1978. In the following year, the undertakings of Kosan Gas Company, the concessionaires of the Company in the domestic LPG market, was merged with the company. Thus, with the various amalgamations, at different points of time, have given rise to the subject that has ever since been growing from strength to strength. Today it is India’s second largest integrated oil refining and marketing company. 

 Keeping pace with the nation’s energy requirements, the company’s infrastructure consists of refineries, cross – country pipelines, LPG bottling plants, lube blending plants and aviation service facilities. Add to this, it has extensive network of retail outlets, regional offices, terminals and depots that truly make it an industry leader. The main products of the company include petrol, high speed diesel, superior kerosene oil, liquefied petroleum gas, aviation turbine fuel, naphtha, furnace oil, bitumen, low sulphur heavy stock, solvents, propylene and over 300 grades of lubes. The company has 20% market share in the POL products and over 40% of the total lube base stock production capacity in the country. It was the first oil major to tap the capital market in February, 1995.  

 Also its ongoing projects and joint ventures are a part of the expansion and diversification plans to meet the demands of a new liberalised economy. It has co-promoted several joint ventures like Mangalore Refinery & Petrochemicals (MRPL), Hindustan Colas, Petronet India, Punjab Refinery Project, Visakh Power Project, Prize Petroleum Company & South Asia LPG Company. 

During 2002-03, ONGC acquired the entire stake of AV Birla Group in MRPL and also infused Rs.6000 millions into MRPL. Consequent to this, ONGC holding in MRPL has touched 51% and the Company’s equity stands at 16.97%. 

Further the company is evaluating the possibility of tapping the market in the current year to part-fund its proposed nine million-tonne Bhatinda refinery. As per the preliminary report the pipeline will traverse a distance of 250 Kms. The project is designed for a thru put of which 3.6 MMTPA under Phase I with a provision to expand to 6 MMTPA. The detailed report is under Consideration and the estimated cost will be of Rs.4333.300 millions.

A subsidiary company “Guru Gobind Singh Refineries” has been incorporated on Dec 2000. Land admeasuring approx. 2000 acres has been acquired. The project cost has been worked out to Rs 98060 millions. 

The company has completed the Rs, 3780 millions Vijayawada to Secunderabad pipeline project and commissioned it on March 2002. The company has also commissioned the 8 Km long tanker discharge pipeline between sunken ship jetty and ATP terminal at Visakh (laid at a cost of Rs.150.000 millions) on June 2001. The new LPG Bottling plant at a capacity 44 TMTPA was set up in Kota and augmentation of nine bottling capacity of its existing plants was also set up at a cost of Rs. 489.400 millions. The modernisation of Vizagh Refinery is under implementation with a capital outlay of Rs. 16350 millions within a scheduled period of 30 months. Construction of Two additional product tank ages at Kerala and Karnataka is under progress. The project was scheduled to be completed in phases in the next financial year at a cost of Rs. 940.000 millions

During 2004-2005 the company has completed its construction of a new grassroot depot at Aonla, Bareilly, Uttarpradesh. This rail-fed depot was completed at a total cost of Rs.102.5 milions. It has 9080 KL product tankages for storage of HSD, MS, SKO and Ethanol which will cater to the market demand of Bareilly, Pilibhit, Badaun, Rampur (Uttarpradesh) and bridging to Haldwani (Uttranchal). The company has also completed its construction of another new grass root depot at Ramagundam, Andhra Pradesh at a total cost of Rs.114.7 millions. The depot has 7974 KL tankage for MS, HSD, and SKO together with product receipt through railway tank wagons from Vijayawada terminal and it will meet the requirement of Nizamabad, Adilabadand Karimnagar. Further the company has commissioned a total of 13100 KL additional tankage at various locations during the year. 

 HPCL has planned to roll out 25 Kls Tank trucks (TTs) for supply of products. 2TTs at Vashi Terminal in April 2004, 1 TT in Wadala Terminal and 2 TTs in ASF service at Shakurbasti have been introduced and 15 TTs will be put on road by September 2005. Also the company is planning to launch 40 KL capacity new generation tank truck during 2005-06. The company has implemented 15 company tank trucks during 2004 and 172 company owned tank trucks all over India is under implementation which will be completed by September 2005. 

The company is implementing the Green Fuel Projects at Mumbai Refinery and Visakh Refinery at a total cost of Rs.28000 millions. After the implementation the refineries will be able to produce Motor Spirit and High Speed Diesel Oil to meet the new Euro specifications. 

Subject is implementing two major product pipeline projects connecting Mundra and Delhi and Loni and Solapur which will meet the consumer demand on the northern sector at an estimated cost of Rs.19600 millions. Further the company is planning to strengthen marketing infrastructure by upgradation, Automation and new facilities for marketing division at a cost of Rs.14000 millions. 

Prize petroleum a joint venture company in association with Aban Lloyd has struck its first own crude oil in its on shore marginal field at Gujarat. 

Subject has branded its retail outlets under the brand name 'CLUB HP' with more than 2250 outlets in the country. The company has launched 'Turbojet' branded diesel in India and also 'Power' in petrol segment.  
During 2005-2006, the companies Mumbai Refinery has undertaken mega project at an approved cost of Rs.18500 millions to meet the MS/HSD of EURO-III grade in Metro/Mega cities and Bharat stage-II grade in the rest of the country. The project will result in enhancing the refining capacity from 5.5 MMTPA to 7.9 MMTPA. The Refinery has already installed & commissioned DHDS 2nd reactor in May 2005. 

The Visakh Refinery has undertaken Clean Fuel Project at an approved cost of Rs.21478 millions to meet the MS/HSD of Euro-III grade in Metro-Mega cities and Bharat-II grade in the rest of the country. The project will result in enhancing the refining capacity from 7.5 MMTPA to 8.33 MMTPA. The project is expected to be completed mechanically by December, 2006. 

Mumbai Refinery has commenced production of BS-II MS/HSD from January, 2005 & Euro-III HSD production from May, 2005. But the production of EURO-III MS will commence after the implementation of ongoing Green Fuel Emission project. 

Vishaka Refinery commenced BS-II/Euro-III HSD & BS-II MS production from January, 2005. The production of EURO-III MS/ production/supply is expected to commence after implementation of ongoing Clean Fuel project. 

The companies Mundra Delhi Pipeline project is under execution and is to commissioned by May 2007. The companies Pune Solapur Pipeline project is expected to be completed by September 2006. 

Additional product tank of 2 x 10000 KL and 1 x 15000 KL for premier grades was completed at Hassan Terminal in May 2005. A total of 44,254 KL additional tankage has also been completed/commissioned at various locations during 2005-2006. A New Aviation Service Facilities at Bangalore and Goa have been commissioned with 880 KL and 400 KL Tankage respectively. 

A 15 Kw Wind/Solar Hybrid Power Plant to support a connected lighting load of 6 KW for a working period of 6 to 8 hours per day is nearing completion at Loni Terminal as a part of Renewable Energy Projects. 

The company has installed and commissioned Energy Saving System consisting of VFDs (Variable Frequency Drives) and automation for TT loading Pumps at 15 Locations out of 32 locations at a cost of Rs.16 millions. 

During 2005-06, the company commissioned 647 Retail Outlets with which the companies total retail outlets stands at 7313. 

Milestone

1952

- The Company was incorporated in the name of Standard Vacuum Refining Company of India Limited on July 5, 1952 under the Indian Companies Act, VII of 1913.

1962

- On 31^st March the name was changed to ESSO Standard Refining Company of India Limited.

1974

- On July 15^th the name of the company was changed to its present name Hindustan Petroleum Corporation Limited, by virtue of Lube India and ESSO Standard Refining Company of India Limited Amalgamation Order 1974 dated July 12, passed by the Company Law Board, Department of Company Affairs, GOI, New Delhi and as published in the Gazette of India Extra-Ordinary GSR No.320(E) dated July 15. A certificate to this effect was issued by the Registrar of Companies, Mumbai on September 4^th.

1976

- With the nationalisation of Caltex Undertakings in India the same were also taken over by the Government of India and subsequently merged with HPCL.

1979

- The undertakings of Kosangas Company Limited was merged with the Company. The shares of the company were sold by the Government to Financial Institutions, Mutual Funds and Banks. Presently the Government holding in HPCL is 60.31%. The balance is being held by Financial Institutions, Mutual Funds, Banks, Foreign Institutional Investors, Employees and Individual Shareholders.

- It has co-promoted several joint ventures like Mangalore Refinery &

Petrochemicals (MRPL), Hindustan Colas, Petronet India, Punjab Refinery Project, Visakh Power Project, Prize Petroleum Co & South Asia LPG Company.

1983

- The capacity of lube plant was increased by an additional 74,000 tonnes per annum of high viscosity index lube base stocks.

1985

- The crude unit and related off-sites were commissioned in January and fluid catalytic cracking unit was commissioned in August.

- During the year corporation embarked upon a project to expand the crude distillation capacity at Mumbai by 2 million tonnes per annum at an estimated cost of Rs.450 millions. This project was commissioned in April.

1988

- Mangalore Refineries & Petrochemicals Limited, is the first joint sector refinery being set up in the country after the Government has allowed entry of the private sector in the petroleum refining industry.

1989

- During the year corporation installed the latest C-generations concept 3*10 MW gas turbines to meet the power requirement at Bombay Refinery with facilities to generate steam simultaneously.

1991

- During September 3*10 MW gas turbine generators and heat recovery steam generators were commissioned at a cost of Rs.792.200 millions at Mumbai.

1993

- During March an MOU was entered into between Government of India and Government of Sultanate of Oman, HPCL and Oman Oil Co., Ltd., for setting up 6 million TPA refinery on the West Coast of India through a joint venture company called Hindustan Oman Petroleum Co. Ltd.

1994

- In March 1993, an MOU was signed between the Government of India, the Company, Government of Sultanate of Oman and Oman Oil Company to form a Joint Venture Company. Accordingly, on March 4, Hindustan Oman Petroleum Company Ltd. (HOPCL) was incorporated. The project is estimated to cost approx. Rs. 44260 millions (at June prices) and both promoters will have a 26% stake each in the equity. – A Memorandum of Understanding was signed on May 24^th between the Company and Colas S.A., France for implementing a project for setting up a Bitumen Emulsions plant. This was followed by execution of the Joint Venture agreement on November 25^th. It is proposed to form a Joint Venture Company (JVC) in the name of `Hindustan Colas Limited’ in the State of Maharashtra with equal equity participation from the Company and Colas S.A., France.

- During the year, the company entered into a tie up with Exxon, a leading oil company for blending and marketing EESO brand of lubes.

1995

- During February, the company issued 173,50,000 equity shares of Rs.10 each with detachable warrants of Rs.380 each as follows.

- a. On firm allotment basis:

- 34,70,000 equity shares with warrants to Indian Financial institutions

3,35,000 shares with warrants to Indian Mutual Funds.

- b. Preferential allotment basis:

- 17,35,000 shares with warrants to share to employees

17,75,000 shares with warrants to shareholders of the company,

34,70,000 shares with warrants to NRIs, balance 66,05,000 shares were issued to the public.

- During the year company entered into a MOU with Saudi Arabian Oil Co.(Saudi Armaco) for setting up a 1 million tonnes p. a refinery. Punjab Armaco would contribute to the extent of 26% in the equity capital of the company.

- During the year company proposed to undertake petrochemical production from feedstock available from the refineries. The petrochemicals planned were paraxylene/PTA, polyisobutylene and acrylonitrile.

- During the same year the company undertook to provide thermal power from surplus heavy fuel oil. The proposed joint venture is to set up 500 MW power plant an estimated cost of Rs.18650 millions.

1996

- During the month of March a joint venture with Colas S.A of France, the company commenced its first State-of-the-art Bitumen emulsion Plant of 20,000 TPA capacity at Vashi, named Hindustan Coalas Ltd.

1997

- A new Terminal was commissioned at Kakinada with 30000 KL Tankage and allied facilities at a cost of Rs. 150.600 millions.

- The Company is contemplating setting up 30 more LPG bottling plants

over the next five years.

- The Company converted the detachable warrant into equity shares of Rs.10 at a premium of Rs.330 per share. Through this conversion of warrant company raised Rs.5899.000 millions. The amount was payable in four instalments of Rs 85 each payable over a period of one year.

- Each warrant was converted into one equity share at a price of Rs.340 a share. With the full conversion of warrants, the government of India’s holding in the Company’s equity capital will be just over 51 per cent, ruling out further dilution in the company’s capital in the near future.

- The company signed an MoU with the government for the execution of four projects, the Vizag refinery expansion project, Vizag-Vijaywada pipeline project, diesel hydro de-sulphurisation projects at Mumbai and Vizag and Punjab refinery project.

- The ministry of petroleum and natural gas has set up an expert committee on 15^th September, to enquire into the causes leading to the breakout of fire at the Company’s Vishakapatnam refining plant.

- The joint venture between the Company and its former parent before nationalisation, Esso, is on slippery ground.

- The Company signed a fuel supply agreement with a private firm which would set up a 100 MW liquid fuel based combined cycle power plant near Kengeri on the city outskirts.

1998

- The Company signed a commercial agreement with Kondapalli Power Corporation Ltd (KPCL) for the supply of naphtha for the latter’s 355-MW combined cycle power generation unit at Kondapalli in Krishna district of Andhra Pradesh.

- The company awarded the contract to build the refinery to South Korea’s Hyundai Heavy Industries.

- The company set up a joint venture company with domestic financial institutions for oil and gas exploration both in the country and abroad.

- The company has commissioned its state-of-the-art modern LPG filling plant at Usar, Alibagh.

- State owned the Company’s joint venture with Aditya Birla Group, Mangalore Refineries and Petrochemicals Limited (MRPL), is keen to set up an independent marketing network.

1999

- American Express and the company signed a memorandum of understanding (MoU) for card acceptance at various gas stations.

- The Company and Gas Authority of India Limited (GAIL) have entered into an agreement for setting up a liquefied petroleum gas (LPG) pipeline and infrastructure from Visakhapatnam to Secunderabad via Rajamundry and Vijayawada.

- The Foreign Investment Promotion Board (FIPB) has allowed the joint venture of Hindustan Petroleum Corporation (HPCL) and Total of France, to set up LNG terminals and venture into downstream activities such as marketing of petro-products, etc.

- The Company is celebrating its silver jubilee year with “Shakti Utsavs” in major Indian cities.

2000

- Scheme of amalgamation of Industrial Perfumes Limited with the company is effective from 9^th February, with retrospective effect from 1^st January, 1999.

- The company signed a confidentiality agreement with Totalfina of France to look at downstream areas, including retailing, once the domestic oil sector is opened up.

- The company decided to float a joint venture information technology company for its e-commerce and other internet based services foray.

- The company set up a Rs 29000 millions power project in Visakhapatnam as part of the company’s diversification strategy.

- The company signed a business initiative with internet service provider (ISP) Satyam Infoway Limited to set up more than 200 cyber cafes at its retail outlets across the country.

- Pepsi has entered its second cyberspace venture forging a tie-up with Satyam and the company as the official beverages supplier for their “Speednet project”.

- Mangalore Refinery and Petrochemicals, the joint venture between the Company and the AV Birla Group of companies, is all set to sign a memorandum of understanding with Kuwait Petroleum Corporation for joint efforts in the downstream sector.

- There was a fire blast in the Refinery at Malkapuram Near Visakhapatnam, on 17^th August.

- India’s largest private Internet Service Providers, Satyam Infoway and the Company have forged an alliance to set up cyber kiosks at various petrol pumps across the country.

- The company entered the Bangladesh lubricants market with a range of its diesel engine and motor oil.

- The company along with ZIP Telecom, front-end operator of Hughes Ispat, set up public access telephone booths at HPCL retail outlets across Maharashtra.

- The company has set up two regional offices in Jamshedpur as part of its strategy to focus on improving services.

- A subsidiary company “Guru Gobind Singh Refineries” has been incorporated on Dec 2000. Land admeasuring approx. 2000 acres has been acquired.

- Government of India is the major shareholder in the company with 51% stake.

2001

- The company has introduced its smart card in Bangalore for the first time in the country.

2002

- The company has informed that the Government of India has appointed Shri Arun Bal Krishnan as Director-Human Resources of the Corporation.

- M B Lal appointed as Chairman & Managing Director of the company.

- The company informed that Shri Naresh Narad, Special Secretary, Ministry of Petroleum & Natural Gas ceased to be a part time ex-officio Director of the Corporation with effect from November 11, 2002 consequent upon his movement from Ministry of Petroleum & Natural Gas, as Secretary, Ministry of Heavy Industries & Public Enterprises.

- M S Srinivasan appointed as part-time ex-officio Director on the Board of

the Company.

- The Company has informed that Shri S D Gupta, Director (Finance) of the corporation passed away on December 26, 2002 after a brief illness.

- Approved Mangalore Refinery & Petrochemicals Limited (MRPL) control to Birlas

- The Company is introduced a new system at its 6,000-odd retail outlets across the country. The Company planned to set up facilities enabling customers to buy original spare parts and accessories for the car

- Tied-up with Gas Authority of India Limited (Gail), Oil and Natural Gas Corporation (ONGC) to purchase LPG

- Tied up with Lubrizol for its own brand of high-performance petrol, branded ‘Power’

- Unveils branded petrol, diesel (Power & Turbojet respectively)

- The Company unveils new retail brand – ‘Club HP’ through which it intended to offer quality personalised vehicle and consumer care through select outlets

- FedEx inks one-year agreement with HPCL to set up transportation services at the Company’s 100 “Club HP” retail outlets in eight cities in the country

- The Company and GAIL sign agreement for formation of new JV Company to distribute and market environmentally friendly fuels in and around the cities of Andhra Pradesh

2003

- Cabinet Committee on Disinvestment (CCD) decides to divest 34.01 per cent equity in Company to a strategic partner

- Government fixes Rs 2,5000 millions net worth for HPCL bidders

- Forges alliance with Chennai-based KwickTel Communications to launch vehicle tracking system

- The company’s shareholding in Mangalore Refinery and Petrochemicals Ltd (MRPL) dipped to 16.89% consequent to MRPL Debt Restructuring Arrangement

- Total FinaElf withdraws from the race for acquiring the 34 per cent stake in the Company.

- The company became the second largest firm in terms of sales with a turnover of over Rs. 500000 millions.

- Launched loyalty Plan for its LPG Consumers

- Launched a new scheme where in the LPG (liquefied petroleum gas) delivery boys will carry portable weighing scales, so that HP customer can measure the Gas contend in cylinder before receiving it

- Unveiled a high-octane petrol brand in the market named as ‘Power ‘93’

- Tied up with Chevron for Aviation Turbine Fuel (ATF) business

- Government of India appoints Mr. C Ramulu as Director – Finance of the Corporation

- Signed agreement with Oil & Natural Gas Corporation (ONGC) for sourcing crude oil

- Subject bags eighth slot among ‘Top10’ in Asiamoney’s corporate governance poll on Asian companies in the energy sector. And joined the club of a select few Asian companies.

- Unveiled Smart Card, which a customer could use to pay for petrol or diesel bought at Company’s outlets

2004

- The Company’s Marketing Initiatives in Sri Lanka

- The Company formed a 50:50 joint venture with Total Gas and Power India (TGPI), a wholly owned subsidiary of Total France, to develop the biggest underground ‘Cavern LPG Storage’ project at Visakhapatnam

- Got award for industrial safety by National Safety Council, Kerala Chapter in chemical industries sector

- Inks pact with Shell India Private Limited for product and infrastructure sharing between the two companies

- Signs agreement with US Pizza, a pizza outlet, which would be opening over 500 delivery units at the Company’s outlets around the country. The understanding is aimed at making the partnership the largest food chain in the country

- Mr S. Roy Choudhary has been appointed as Director-Marketing in the Company, effective May 10

- The Company on June 26 signed a memorandum of understanding with Indian Oil Corporation Limited.

Directors Reports:

SALES/INCOME FROM OPERATIONS

The Company has achieved sales/income from operations of Rs. 969181.500 millions as compared to Rs.769202.600 millions in 2005-06.

PROFIT

The Company has earned gross profit of Rs. 30941.400 millions as against Rs. 11512.100 millions in 2005-06 and

profit after tax of Rs. 15711.700 millions as compared to Rs. 4056.300 millions in 2005-06.

MEMORANDUM OF UNDERSTANDING WITH GOVERNMENT OF INDIA

The Corporation has been achieving an all round "Excellent" rating vis-a-vis MOU targets for fifteen consecutive

years upto 2005-06 as a result of the concerted efforts of all the employees. The performance of the Corporation

of the year 2006-07 also qualifies for "Excellent" rating basis self assessment. The details of performance visa-

vis MOU 2006-07 targets are enclosed (Annexure I).

REFINERY PERFORMANCE

HPCL refineries achieved the highest ever combined crude thruput of 16.66 MMT as against 13.82 MMT achievedduring 2005-06.

During the year, Mumbai Refinery achieved crude thruput of 7.42 MMT as against 6.25 MMT for the year 2005- 06, which corresponds to capacity utilization of 134.80%. The Fuel and Loss at Mumbai Refinery was 6.34% during the year, an improved performance over the previous year's fuel and loss of 6.76%.

During the year, Visakh Refinery achieved crude thruput of 9.24 MMT as against 7.57 MMT for the year 2005-06, which corresponds to capacity utilization of 123.20%. The Fuel and Loss at Visakh Refinery was 5.80% during the year, an improved performance over the previous year's fuel and loss of 5.99%.

Gross refining margins of Mumbai Refinery averaged at $4.78 per barrel as against $3.22 per barrel for the year

2005-06. Gross refining margins of Visakh refinery averaged at $ 3.51 per barrel as against $ 2.56 per barrel for the year 2005-06. Both refineries are on the verge of completing new facilities to produce environment friendly fuel.

MARKETING PERFORMANCE

The market sales (including exports) registered 21.69 MMT as against 19.42 MMT recorded in 2005-06. The

company achieved highest ever turnover of Rs. 914480.300 millions during the year as against Rs.740441.100 millions during 2005-06.

Management Discussion and Analysis Report Overview

The Indian economy continued to be one of the most dynamic economies in the world in 2006-07, recording a growth of 9.4%. The growth has been supported by a sustained increase in savings and capital formation over last few years. Capital inflows have supplemented domestic savings, boosting capital formation in the country. On sectoral basis, growth in 2006-07 was underpinned by double-digit growth in the Industry and Services sector. The Agriculture sector posted a modest growth of about 3%.

Crude oil prices generally remained above $55 per barrel throughout 2006-07 due to geopolitical tensions, outages in oil producing regions such as Nigeria, Alaska and tight capacity along the entire oil supply chain, be it production, refining or pipeline. The problem has been exacerbated by mismatch between installed refinery capacity and crude type. Indian crude basket price averaged around $62 per barrel during 2006-07. High prices have also caused a fundamental power shift in the oil industry. Resource nationalism has resurfaced with a number of oil producing states consolidating their hold on oil resources. Increasingly, state-owned enterprises of oil consuming nations are aggressively seeking access to resources competing and co-opting with other state-owned companies. Current conditions portend high prices in near-term future also.

The robust growth in the Indian economy is reflected in petroleum product consumption. Consumption rose by about 6% during 2006-07, the highest growth recorded since 1999-00. However, oil production in the country continues to be stagnant around 33 MMT. A number of basins owned by ONGC/OIL have matured. Resultant decline in production has been made up by private and joint venture fields. The country is dependent on oil imports for more than 75% of its crude requirements. In 2006-07, about 111 MMT of crude oil valued at $48 billion was imported while about 32 MMT of petroleum products were exported. In value terms, petroleum product exports were around $18 billion during 2006-07. Private sector refineries are the major source of exports.

Most of the private players have virtually exited the indigenous market.

Company Overview

Hindustan Petroleum, with about 16% market share, is one of the major players in Indian downstream oil sector. The Company is ranked 336 in the Fortune 500 of 2007. Total turnover of the Company in 2006-07 was

Rs. 9144B0.300 millions. Profit after tax was Rs.15711.700 millions as against Rs.4056.300 millions in 2005-06. The Government continued to shield the consumer from high oil prices through subsidy sharing mechanism involving downstredm oil companies, the Government and upstream oil companies. Refineries also shared the burden through Trade parity pricing mechanism comprising of 80% import parity prices (IPP) & 20% export parity prices as against full IPP paid to refineries earlier. Further, Stand alone refineries did not offer any discounts on

PDS Kerosene & Domestic LPG during the year. The net under recovery absorbed by HPCL on marketing of sensitive products during 2006-07 was about Rs.7720.000 millions. Refining and marketing is the core area for the

Company and its efforts are directed at ensuring smooth flow of petroleum products throughout the length and breadth of the country at the least possible cost.

With the spiraling crude prices, price inflexibility and squeeze on margins, the treasury management has been under severe pressure throughout the year. The average borrowings have gone up to Rs. 614.700 millions as of 31^st March 2007 in relation to the figure of Rs. 29910.000 millions the previous year. The Corporation resorted to many innovative solutions such as proper mixture of long term and short term borrowings, funds through ECB route, very close monitoring of collections and fund flow. Further the year 2006-07 saw a very volatile foreign exchange market. Suitable steps to minimize the adverse impacts have been taken by timely hedging of foreign exchange exposures and proper mix of hedging instruments.

Refining

Refineries at Mumbai and Visakh processed 16.66 MMT of crude in 2006-07 as against 13.82 in 2005-06.

Capacity utilization by refineries amounted to 128%. Gross refining margins (GRM) of the Mumbai Refinery averaged $4.78 per barrel as against $3.22 per barrel for the year 2005-06 while the Visakh Refinery posted a GRM of $3.51 per barrel versus $2.56 per barrel for the year 2005-06. The refineries are in the process of upgrading their facilities to produce Euro-Ill equivalent grade of gasoline and diesel. The projects envisage a cost of around Rs. 40000.000 millions. Once completed, projects will also increase refining capacity. The Mumbai refinery envisages increase in refining capacity from the current 5.5 MMTPA to 7.9 MMPTA while the Visakh refinery capacity would increase to 8.33 MMTPA from the current level of 7.5 MMTPA. Both the refineries have brought down the fuel and loss levels to improve the profitability of the operations.

A risk management policy has been developed and approved to manage exposure to fluctuations in crude oil and product prices. Accordingly, after due training, a trading desk has been established and derivative trading activity commenced in February 2007. The establishment of an integrated software solution for the trading team is in progress.

Retail

The business environment in the petro-retailing in India has changed significantly. Oil Companies are transitioning from providing random experience to providing differentiated experience in customized formats at the retail outlets. Sales of auto-fuels and SKO/LDO through Retail SBU contribute about 57% of the Company sales. In

2006-07, 673 new retail outlets were commissioned to expand the reach of the Company taking the total to

7986 as on March 2007. To achieve its Retail Vision, the Company has developed a Retail Value Proposition, keeping the "Customer experience" as the core of strategy. Brand strategy has been aligned to customer needs by focusing on Driver brands - Power, Turbojet, Loyalty Cards, HP Junction, Club HP, Hamara Pump, "Fleurs"

Clean toilets. Through these initiatives, aim is to deliver compelling, differentiated and consistent experience to the customers.

HPCL has positioned a number of retail outlets on the platform of "Outstanding Customer & Vehicle Care" and branded these as "Club HP" outlets. During 2006-07, 662 outlets were branded as "Club HP" taking the total number to 3515. Club HP outlets now constitute 44% of total Retail network. To ensure consistency in the delivery of superior customer services, all the Club HP Outlets are certified by M/s Bureau Veritas, a reputed third party agency. Market research shows that customers demand several non-fuel offerings at fuel outlets. It provides a great opportunity for the Company to sweat the retail outlet real estate. The focus now is to partner with the best in class brands in the relevant categories.

As incomes rise, rural markets present an attractive opportunity to expand market share. 'Hamara Pump' format is targeted specifically at rural market. In 2006-07,318 "Hamara Pumps" were commissioned taking the total number to 925 as on March end 2007. Seeds, pesticides and fertilizers are also being sold to the farmers through 60 "Kisan Vikas Kendras" set up at select "Hamara Pump" outlets.

Fuel adulteration remains a major area of concern for consumers. The Company has undertaken a number of initiatives to address these concerns by leveraging technology. These include inter-alia retail automation, vehicle management system and electronic sealed parcel delivery system. Retail Automation provides end to end solution in monitoring the sales and stocks online and eliminates manual intervention. The features include real time density display at the point of sale to enhance customer confidence; plugging loop holes across the supply chain through GPS/GSM technology based Vehicle Management System. As an added check, Marker doping in SKO was also commenced by the Company with effect from 01/10/2006 to curb kerosene adulteration in auto-fuels.

The Company aims to increase its market share in petrol/diesel retail segment from current 22% through these initiatives.

Pipelines

In an endeavor to enhance product availability and minimize transportation cost two major pipeline projects viz. Mundra-Delhi pipeline and Pune-Solapur were planned by the Company. Pune Solapur Pipeline was commissioned in November 2006 while mechanical completion of the Mundra Delhi Pipeline has been achieved in April 2007.

LPG

The LPG Business line accounts for approximately 13% of the total volume base of HPCL. HPCL was the first Company to brand LPG Marketing under the platform of "Ji Haan" with focus on instant service to LPG customers.

The Company launched a web-based registration system for new and double bottling connections. Also, a

Complaint Management System, a portal for integrating customer complaints, was launched to provide an efficient, effective and user-friendly system for handling of customer complaints so as to reduce the lead-time in reaching and resolving complaints.

Suraksha rubber hoses were promoted through various means like street plays, banners, posters, leaflets etc., to ensure safety of the user. Campaigns involved NGOs, Self Help Groups & Tribal Groups also to improve effectiveness. The Company introduced a co-branded "Green Label" series of higher thermal efficiency stoves in all markets across India. These stoves have thermal efficiency of minimum 68% and provide 10% savings in fuel expenses for customers.

The unique 'HP Gas Rasoi Ghar' concept was further extended at hospitals and forest areas. Today, there are over 1740 'Rasoi Chars' operating across the country benefiting over 25,000 families.

All the bottling plants have been upgraded with the 'state-of-arf world class bottling and quality assurance facilities to ensure the weight and safety of cylinders.

In order to curb the misuse of subsidized fuel for non-domestic purposes, the Company has intensified controls and surveillance to ensure refill supplies to genuine customers including colour coding of domestic/non-domestic cylinders. Intensive efforts have been initiated in non-domestic segment. As a result, the non-domestic sector posted a growth of 62% in 2006-07.

Industrial & Aviation Fuels

In the last few years, demand for industrial fuels especially FO/LSHS and Naphtha has been affected by greater availability of gas and trend is expected to continue in future. However, despite decline in sales at the aggregate industry level, HPCL posted a growth of 2.2% in FO/LSHS sales in 2006-07. Massive road construction projects have created a huge demand for Bitumen and the Company has seized this opportunity by posting a growth of 33% in Bitumen sales. Scorching growth in the Aviation sector is another growth area for the Company and the same is reflected in 18% growth in ATF sales.

HPCL has a strong legacy in the lubricants sector and it is being strengthened continuously through introduction of new products. The Company continues to promote major brands through innovative promotional activities. A new brand of Diesel Engine Oil "HP Milcy Turbo 15W40" was launched last year. Upgraded version of "HP Racer

4 Excel", which is an API SL level product, was also introduced. In the industrial /direct segment, the Company continued to focus on core sectors such as Railways, Coal, and Steel etc. and on corporate/genuine oil tie-ups.

Strong R&D focus enables the Company to continuously upgrade its product offerings in line with evolving customer needs.

Alternate Energy sources

The current market imperatives are motivating the oil companies look at alternate energy sources like bio diesel, ethanol etc. HPCL has also developed its plans and is implementing projects in the field of alternate energy. HPCL has signed an agreement with GB.Pant University for tissue culture research to improve the yield from Jatropha seeds. The Company is in the process of finalizing contract farming for cultivation of

Jatropha in an area of about 5000 acres in collaboration with the Govt of Chattisgarh and TERI. Ethanol extracted from Molasses is blended 5% with petrol as an alternate option. Projects are under implementation for setting up of 100MIW electricity generation capacity through wind mill turbines and initial commissioning of 2 turbines of 5 MW capacity has been completed.

Information Technology

Information technology is being harnessed by the Company to improve productivity across the functions. The

Enterprise Resource Planning (ERP) system is now operational on Oracle Software across the Company. The migration of all balances from the legacy systems has been completed. The functionality of the ERP system is being further enhanced by development of various add-on functionalities using work flow applications. The system has substantially reduced the time taken for closing of accounts. Tracking of cost of operations has become easy and there is an improvement in management control due to standardization of various business processes. A Data Centre is being set up in Hyderabad to provide complete backup and mirror image for the main IT base in Murnbai, thereby, ensuring uninterrupted operations in case of an emergency.

Human Resources

Bustling economy has created huge demand for trained manpower across industries. As a result, contrary to earlier trend of attrition at junior levels, the Company is facing increasing attrition at the middle-management level. This is one of the major challenges facing the Company today. Replacing this level of experience requires at least 2 to 3 years of training to existing employees. Specific processes have been put in place to continually upgrade skills of the employees through training and rotational assignments. On an average 300 new officers have been recruited in last two years to mitigate manpower crunch in future.

Official Language Implementation

Progressive use of Hindi in the Corporation continues to receive due importance. Details are given under the segment Special Focus Areas.

Diversification & Joint Ventures

Although, refining and marketing is the core area for the Company, new opportunities are being explored to access new revenue streams and even out variations in cash flows from downstream business. Accordingly, the

Company has ventured in upstream and city gas distribution. The Company has shares of about 10- 20 % share in the 15 blocks awarded to various consortia under NELP-VI, taking the total blocks to 22 numbers including blocks in Oman and Australia. For distribution of CNG and City gas distribution in the States of Andhra

Pradesh, Madhya Pradesh and Rajasthan the Company has entered into Joint venture with GAIL.

The Government of Andhra Pradesh has nominated HPCL as an anchor Company for development of Petroleum,- Chemicals and Petrochemicals Investment Region (PCPIR) in Visakh. The Company is in talks with national and international companies for development of the PCPIR.

LPG cavern storage facility being set up in Visakhapatnam, in joint venture with TOTAL, is nearing completion.

The project is the first of its kind in south and south-east Asia.

A joint venture has been established with Mittal Energy Investments Pte. Ltd. for setting up of a green field refinery at Bhatinda, Punjab. This will be a state-of-art refinery with an initial capacity of 9 MMTPA. The Project is expected to cost around Rs. 180000.000 millions and the facilities include refinery units, pipeline from Mundra to

Bhatinda, crude oil receiving terminal, SPM and jetty at Mundra port. The Project has achieved the financial closure and is expected to be completed by the year 2011.

Indian economy is expected to grow at around 8% in near future. As income levels rise, demand for petroleum products will also increase, thereby providing great opportunity for oil companies. The Company will continue to consolidate its core business while making judicious investments in related business fields. The Company has finalized an investment outlay of over Rs 110000.000 millions in XI Plan. Some of the major projects under XI plan include Lube Oil Base Stock Upgradation at Mumbai Refinery, upgradation and retrofitting for production of

Euro IV Compliant fuels, facilities for Mixed Xylene and Propylene production at Mumbai and Visakh Refineries, and Delayed Coker unit for bottoms upgradation at Visakh.

News:

HPCL has been awarded the CIO 100 Award for the Second Consecutive Year

27 Sep 2007 , Mumbai :

HPCL has been awarded the CIO 100 Award for the Second Consecutive Year. The Award was received by ED-IT&ERP, Ms Nishi Vasudeva, from Mr. David Hill, CEO  & President, IDG at an awards ceremony held recently at New Delhi.

 “CIO 100” award of IDG (International Data Group) is one of the most prestigious recognitions in the IT Industry worldwide. Over the years a CIO 100 award has come to be considered the equivalent of the Oscars of the IT Industry across the world.

CIO 100 award has been instituted in India since last year. HPCL has been the recipient of this award in the inaugural year too. The theme of the second annual CIO 100 Awards in 2007 was “The Innovative 100” and celebrated organizations that are using information technology in innovative ways.

HPCL received the award for its “Project Parivartan” and extending the benefits of the ERP system to its various stakeholders through deployment of information portals for customer, vendors & transporters and also enabling e-payments. In-house development of Quality Control monitoring module, C&B & Payroll modules, interfaces with Maximo, tank truck filling & weighbridge automation also contributed to bagging this award.

The year’s CIO 100 honorees were chosen by a jury comprising of eminent CIO’s, academics and members of IDG’s editorial team.

CMT REPORT (Corruption, Money Laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.39.40
UK Pound	1	Rs.81.12
Euro	1	Rs.56.69

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	8
PAID-UP CAPITAL	1~10	8
OPERATING SCALE	1~10	8
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	8
--PROFITABILIRY	1~10	8
--LIQUIDITY	1~10	8
--LEVERAGE	1~10	8
--RESERVES	1~10	8
--CREDIT LINES	1~10	9
--MARGINS	-5~5	-
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		73

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
NR		In view of the lack of information, we have no basis upon which to recommend credit dealings	No Rating

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions