High prices may harm oil PSUs

High global crude oil prices and the automobile fuel price cut in February is likely to adversely hit the performance of the government-owned oil marketing companies in the current quarter (January-March), though the annual performance is projected to be stronger than last year's.

"The Indian basket of crude oil breached the $60 a barrel mark twice this quarter, but the oil bonds did not come in sufficient quantity," Kenin Jain, an analyst at ASK Raymond James, said. The government issued oil bonds worth Rs 5,000 crore in February.

Indian Oil Corporation (IOC), the country's largest retailer of petroleum products, returned to the black in the last quarter primarily on the back of Rs 2,533 crore it received in the form of oil bonds from the Union government and Rs 780.67 crore from the stake sale in the Oil and Natural Gas Corporation.The government has so far issued bonds worth Rs 19,500 crore to oil marketing companies. The bonds are expected to help these companies record better numbers this financial year compared with the year-ago period when no bonds were issued.

In the December quarter, the oil marketing companies were making profits on the sale of petrol, while their margins on diesel sales were marginally in the negative territory. However, in the first fortnight of March, the losses on the sale a litre of petrol rose to Rs 4, while that for diesel rose to Rs 2.60 a litre, primarily due to the cut in prices of petrol and diesel in February. "Although the average price of the Indian basket was much higher in the first two quarters of the financial year, the hike in prices of petrol and diesel in June allowed companies some breathing space," analysts said.

The price of the basket of crude oil that Indian refiners buy has averaged $56.29 a barrel so far this quarter. The average price of the basket was $67.13 a barrel in the April-June quarter, $67.71 in the July-August quarter and $58.45 in the last quarter.

The stocks of the oil marketing companies too reflect the weak quarter that most analysts predict.

IOC has seen its share dip on the Bombay Stock exchange dip by 9.54 per cent this quarter.

Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL), the second and third largest retailers respectively, have seen their share prices fall by 10.20 per cent and 7.05 per cent respectively.