IOC, BPCL, HPCL may post Rs 10,700-cr combined loss in Q1: Report

Indian Oil Corporation (IOC), Bharat Petroleum and Hindustan Petroleum may post a combined loss of Rs 10,700 crore in June quarter on selling petrol and diesel at rates below cost, a report said on Monday.

While the raw material (crude oil) prices soared in April-June, petrol and diesel prices were not revised, leading to marketing losses which offset strong refining margins, ICICI Securities said in the report.

The three state-owned oil marketing companies -- IOC, BPCL and HPCL -- control 90 per cent of the retail petrol and diesel sales in the country. They also own refineries that turn crude oil into fuel such as petrol and diesel.

While margins on turning crude into fuel have been high, the marketing wing accrued losses from unchanged petrol and diesel rates.

ICICI Securities said the companies are losing Rs 12-14 per litre on petrol and diesel, completely offsetting the strong refining performance during the quarter.

"We estimate gross refining margins (GRMs) to remain fairly strong at USD 17-18 per barrel levels (factoring in inventory loss of USD 0.1-0.2 a barrel) and marketing volume growth of 17-20 per cent, thanks to continued recovery in prospects and a weaker base," the brokerage said.

Yet, the sharply higher retail losses in petrol and diesel will "drive an EBITDA loss of Rs 6,600 crore and a net loss of Rs 10,700 crore for the OMCs in Q1FY23E (April-June quarter of 2022-23 fiscal)," it said.

Going forward, with some decline seen in crude in the last 2-3 days and the resultant dip in key product spreads as well, some respite will be forthcoming for the marketing losses.

"However, the delta from GRMs will also reduce, which limits earnings triggers for FY23E (April 2022 to March 2023)," it said.

For Reliance Industries Ltd, the brokerage saw an operationally and financially strong quarter.

It estimated a consolidated EBITDA/PAT of Rs 38,900 crore/Rs 24,400 crore (67 per cent year-on-year growth in EBITDA, 77 per cent in profit after tax or PAT) - the highest ever.

"These all-time highs would come on the back of a massive 80 per cent growth in oil-to-chemical segment EBITDA, sharply higher (up 100 per cent) retail EBITDA, and EBITDA growth of 26 per cent for Reliance-Jio," it said adding prospects for the next nine months would be impacted by the estimated USD 8 per barrel hit from the higher duties on fuel exports imposed with effect from July 1, 2022.