BPCL: Administered pain

The inability to raise fuel prices scar BPCL's fourth quarter numbers

The price paid because of the political reluctance to raise fuel prices is clearly visible in BPCL's fourth-quarter results. The company has reported a 16 per cent drop in profit after tax to Rs 394.3 crore, which is in tune with analysts' expectations.

Operating profit has dropped 17 per cent to Rs 701.6 crore in March 31, 2004, and operating profit margin has dropped 176 basis points to 5.07 per cent.

Analysts said the magnitude of the losses incurred by domestic oil companies on diesel and petrol could be understood by referring to the Singapore gasoline prices.

Singapore prices have been hovering at approximately $39 a barrel in the first quarter of CY04 compared with around $37 a barrel in the period from mid-November to the first fortnight of December 2003.

With oil marketing companies such as BPCL unable to raise the retail price of petrol and diesel after January 1, 2004, analysts point out that BPCL would have had to bear a burden of approximately Rs 350 crore - Rs 400 crore in the March quarter.

In addition, over the last quarter, global LPG prices have shot up by approximately $30 a tonne, leaving companies such as BPCL to bear a subsidy burden of approximately Rs 130 per cylinder of cooking gas compared with a subsidy of approximately Rs 105 per cylinder in the latter half of CY03.

As a result, BPCL's loss on subsidy for LPG has been estimated by analysts at approximately Rs 150 crore - Rs 175 crore in the March 2004 quarter. The only upside for the company were refinery margins which have grown around 25 per cent to reach $4.64 a barrel in FY04, and it helped to partially overcome the losses incurred on retail fuel sales.

Going forward, an improvement in BPCL's results would depend on how quickly and by how much the new government would increase retail fuel prices. In the interim, high refining margins would provide some cushion to the company.

And with the Congress lead government ruling out disinvestment of BPCL and HPCL investor sentiment for PSU oil company scrips has shown signs of turning sour "" on the bourses, the BPCL scrip has dropped around 8.5 per cent over the last 11 days as compared to the Sensex gain of around 1 per cent.

With contributions from Amriteshwar Mathur