Indian state-owned oil marketing companies' (OMCs) financials may be at risk in the near to medium term because of the pressure from the government to increase shareholder returns, Fitch Ratings said on Friday.
The US rating multinational noted that higher shareholder returns will put more pressure on the financial profiles of companies which have large investment plans for the next two years.
The OMCs additionally face the risk of government intervention in fuel prices during the elections but Fitch said its does not foresee any significant impact on OMCs' financial profiles on account of fuel price controls.
"We expect the OMCs to make up the losses in the subsequent period during the year in such an event. We believe OMCs will continue to revise prices daily to reflect the market prices over the medium term," the agency said.
The OMCs -- Indian Oil Corporation Ltd (IOC, BBB-/Stable), Bharat Petroleum Corporation Limited (BPCL, BBB-/Stable) and upstream entity Oil India Limited (OIL, BBB-/ Stable) -- declared high interim dividends of 67.5 per cent to 110 per cent of the face value of their shares.
They also undertook share buybacks in the last fiscal.
"These were likely to have been driven by pressure from the Indian government (BBB-/Stable) to increase shareholder returns to shore up the weak fiscal position and finance promises made ahead of elections in April and May 2019," Fitch said.
IOC and BPCL are in the process of upgrading and expanding their refineries and improving downstream integration in petrochemicals. OIL plans to augment its domestic production and reserves.
In addition, BPCL and OIL are likely to invest in an upcoming Mozambique liquefied natural gas (LNG) project after a final investment decision is taken on it, the report said.
--IANS
ravi/sn/bc
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