The cost of helping the government in its fight against the surging cost of living in the country is likely to result in Rs 27,000-crore cumulative net loss for India’s three largest state-owned refiners in the quarter ended September, according to a Moneycontrol poll.
The quantum of the cumulative net loss of Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation in the quarter would be the highest since the June quarter of 2012-13 when they reported a combined loss of Rs 40,536 crore.
“OMCs (oil marketing companies) are likely to report huge losses for the second consecutive quarter due to continued high marketing under-recoveries, normalisation of refining margin, and huge inventory losses,” JM Financial said in a preview note.
Indian Oil, Hindustan Petroleum and Bharat Petroleum have refrained from raising pump prices at the rate at which global crude prices have risen over the past year, which has helped in containing retail inflation in the country. Domestic retail fuel prices were deregulated from government control in 2014.
Further, the state-owned oil marketing companies have also suffered from high under-recoveries on the sale of liquefied petroleum gas cylinders as companies refrained from passing on the full cost of such products to help reduce the pinch on consumer wallets from surging global gas prices.
In the June quarter, OMCs relied on surging global refining margins to offset part of the losses in their marketing division. The luxury, however, ended in the September quarter as global refining margins slumped sequentially along with a sharp depreciation in the rupee against the dollar.
Refining margins are still nearly double their levels in the year-ago quarter, which should help OMCs post year-on-year rise in gross refining margins. That said, PSUs lost Rs 10 a litre on diesel sold by them during the quarter as against a profit of Rs 7 per litre in the year-ago quarter.
The rupee depreciated over 3 percent in the September quarter against the dollar. The depreciation negated most of the benefits for Indian state-owned refiners from buying discounted Ural crude oil from Russia during the quarter.
“Weaker currency will also be negative for oil marketing companies overall, as companies have not been able to pass on cost escalations,” said brokerage firm Kotak Institutional Equities in a preview note on the sector.
Indian Oil
The country’s largest public sector refiner is expected to report a net loss of Rs 13,340 crore in the September quarter against a net profit of Rs 6,360 crore in the year-ago quarter, according to an average of seven brokerages polled by Moneycontrol.
The company will report its September quarter earnings on October 29.
The bulk of the loss will flow from a weak operating environment, as the company is likely to report an operating loss of Rs 12,736 crore.
The public sector enterprise’s topline, however, is expected to grow 33 percent year-on-year (YoY) to Rs 1.8 lakh crore, driven by strong demand for automobile and jet fuel as the reopening of the economy helped normalise business activity.
Brokerage firm Spark Capital expects throughput for the refiner to have jumped 7 percent YoY to 16.3 million tonne during the quarter. Indian Oil’s gross refining margin in the quarter likely grew 37 percent on-year to $9 a barrel but slumped 72 percent quarter on quarter (QoQ).
Bharat Petroleum
Bharat Petroleum is expected to report a net loss of Rs 6,396.9 crore for the reporting quarter against a net profit of Rs 2,694.1 crore in the year-ago quarter.
In the previous quarter, Bharat Petroleum reported a net loss of Rs 6,542 crore owing to high marketing losses.
Much like Indian Oil, Bharat Petroleum, too ,is expected to report strong growth in topline driven by high demand. The refiner’s revenues are likely to rise 29 percent on a year-on-year basis to Rs 1.05 lakh crore.
Hindustan Petroleum
The company with the highest share of domestic oil marketing business, Hindustan Petroleum is likely to report a net loss of Rs 7,034 crore for the September quarter against a net profit of Rs 1,923.5 crore in the year-ago period.
The company will report its September quarter earnings on November 3.
Sequentially, it will see improvement in its bottomline after reporting a record net loss of Rs 10,235 crore in the June quarter, largely due to a decline in marketing losses from the previous quarter.
Hindustan Petroleum’s revenues will rise 22 percent YoY to Rs 1 lakh crore, driven by improvement in mobility in the quarter.
At 1:26 pm, shares of Indian Oil were up 0.1 percent at Rs 68.35 on the National Stock Exchange, while those of Bharat Petroleum were down 0.8 percent at Rs 303.3. Shares of Hindustan Petroleum were up 0.1 percent at Rs 210.7 on the NSE.
(Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.)
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