Earnings of oil marketing companies (OMCs) in the second quarter of current fiscal (Q2FY24) is expected to moderate from record-highs achieved in the previous quarter, yet likely to remain robust on a sharp rise in gross refinery margins (GRM).
According to a report by JM Financials, Q2 earnings of OMCs is expected to moderate from the record high in the April-June quarter due to the sharp impact on marketing segment earnings on account of higher international crude prices. However, Q2 results are still expected to be robust aided by strong gross refinery margins (GRMS) and significant inventory gains.
OMCs’ weighted average auto-fuel gross marketing margin has moderated to ₹3.3/litre in 2QFY24 from the record high of ₹8.8/litre in 1QFY24. Crude oil prices rose as high as 30 per cent in three months spanning July-September as the production cuts announced by Saudi Arabia and Russia have squeezed the global crude supply.
However, even on the rise in Brent crude prices, the reported GRMs (including inventory gains) of OMCs is likely to rise sharply by $14-19 per barrel in the September quarter, according to the domestic brokerage.
Brokerage firm Motilal Oswal also foresees a robust quarter and notes that the profitability of OMCs may surge to ₹26,200 crore in Q2FY24 from a loss of ₹2,700 crore in Q2FY23, fueled by strong marketing margins.
However, in a recent report, Moody’s said that high crude oil prices will reduce the profitability of the three state-run OMCs in India — Bharat Petroleum Corp Ltd (BPCL), Hindustan Petroleum Corp Ltd (HPCL), and Indian Oil Corp (IOC), all commanding a Baa3 rating by Moody’s.
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Indian Oil Corp:
The state-run oil refiner reported a standalone net profit of ₹13,750.44 crore in the quarter ended June 2023, rising 36.7 per cent from ₹10,058.69 crore in the preceding March quarter of previous fiscal. IOC’s revenue from operations in Q1FY24 fell 2.36 per cent to ₹2.21 lakh crore from ₹2.26 lakh crore in the preceding quarter. According to JM Financials, IOC’s reported GRM – including inventory gains is likely to rise sharply by $18.6/bbl in Q2FY24. The crude inventory gain is estimated to be $6/bbl.
Hindustan Petroleum:
HPCL reported a consolidated net profit at ₹6,765.5 crore in the first quarter of the fiscal year 2023-24. The oil refiner’s revenue fell at ₹1.18 lakh crore in the June quarter of FY24, as compared to ₹1.21 lakh crore a year ago. According to brokerages, HPCL’s reported GRM – including inventory gains is likely to rise sharply by $14.7/bbl in Q2FY24. The crude inventory gain is estimated to be $3/bbl.
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Bharat Petroleum:
BPCL reported a net profit for the fiscal’s first quarter ended June (Q1FY24) to ₹10,550.88 crore. The oil refiner’s total revenue from operations fell nearly 4.3 per cent on year to ₹1,28,256.65 crore during the quarter ended June from ₹1,38,389.60 crore in Q1FY23. According to brokerages, BPCL’s reported GRM – including inventory gains is likely to rise sharply by $16.2/bbl in Q2FY24. The crude inventory gain is estimated to be $3/bbl.
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Updated: 10 Oct 2023, 07:27 PM IST