ICICI Securities said in a report released on Monday that Indian Oil Corporation (IOC), Bharat Petroleum and Hindustan Petroleum may incur a loss of Rs 10,700 crore in the June quarter on lower prices of petrol and diesel.
While prices of crude – crude oil – rose in April-June, prices of petrol and diesel were not revised together, leading to marketing losses, which offset strong refining margins, it said.
The three state-owned oil marketing companies – IOC, BPCL and HPCL – control 90% of retail petrol and diesel sales in the country. They also have refineries that convert crude oil into fuels like petrol and diesel.
While margins on conversion of crude oil to fuel have been higher, the marketing wing has suffered from unchanged petrol and diesel rates.
ICICI Securities said companies are incurring losses of Rs 12-14 per liter on petrol and diesel, which is fully offsetting the strong refining performance during the quarter.
“We anticipate gross refining margin (GRM) to remain fairly strong at the $17-18 per barrel level (factoring in an inventory loss of $0.1-0.2 per barrel) and a 17-20% increase in marketing volume, with prospects Thanks to continuous improvement and a weak base,” the brokerage said.
Nevertheless, the sharply higher retail losses in petrol and diesel will result in “EBITDA loss of ₹6,600 crore and net loss of ₹10,700 crore for OMCs in Q1FY23E (April-June quarter of 2022-23),” it added.
Going forward, the crude oil has witnessed some decline in the last 2-3 days and as a result the major product has also declined, some respite for the marketing deficit is about to come.
“However, the delta from GRM will also reduce, limiting the earnings trigger for FY23E (April 2022 to March 2023),” it said.
The brokerage witnessed a strong quarter both operationally and financially for Reliance Industries Ltd.
It estimated consolidated EBITDA/PAT of ₹38,900 crore/ ₹24,400 crore (67% year-on-year growth in EBITDA, 77% in net profit) – the highest ever.
“These all-time highs will come on the back of a massive 80% growth in oil-to-chemical segment EBITDA, sharply high (up 100%) retail EBITDA, and 26% EBITDA growth for Reliance-Jio,” it said. He said prospects for the next nine months would be impacted by an estimated $8 per barrel hit from higher tariffs on fuel exports, implemented from July 1.