In the latest financial results for the July-September quarter of the fiscal year 2024-25 (Q2FY25), major oil marketing companies (OMCs) in India, including Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL), have reported significant declines in net profit. The drop is primarily attributed to weak refining margins and losses from liquefied petroleum gas (LPG) sales.
Key Financial Highlights
Indian Oil Corporation Ltd (IOC)
- Net Profit Decline: IOC experienced a staggering 98.6% drop in net profit, reporting only ₹180.01 crore compared to ₹12,967.32 crore in the same quarter last year.
- LPG Under-Recovery: The company faced an under-recovery of ₹8,870.11 crore on LPG sales due to government-controlled pricing that fell below actual costs.
- Refining Margins: IOC earned just $4.08 per barrel on crude oil refining, a sharp decline from $13.12 per barrel last year.
- Revenue from Operations: Revenue decreased to ₹1.95 lakh crore, down from ₹2.02 lakh crore a year earlier.
Bharat Petroleum Corporation Ltd (BPCL)
- Net Profit Drop: BPCL’s standalone net profit fell by nearly 72%, reaching ₹2,397 crore, down from ₹8,501 crore in Q2FY24.
- Revenue Performance: Despite the profit decline, BPCL’s revenue from operations rose slightly by 1%, totaling ₹1.17 lakh crore compared to ₹1.16 lakh crore last year.
Hindustan Petroleum Corporation Ltd (HPCL)
- Net Profit Plunge: HPCL reported a massive decline of 97.8% in net profit, with a consolidated figure of only ₹142.67 crore, compared to ₹5,826.96 crore in the previous year.
- Sequential Decline: Compared to the previous quarter’s earnings of ₹633.94 crore, HPCL’s profits also showed a significant decrease.
Market Context and Challenges
The OMCs had previously benefited from holding petrol and diesel prices steady despite falling costs. However, with recent price cuts of ₹2 per litre just before general elections, these companies are now facing squeezed margins. The reduction in product cracks—defined as the difference between crude oil prices and refined product prices—has further compounded their challenges.
Analyst Reactions and Future Outlook
Analysts on D-Street have reacted by reducing target prices for OMC stocks due to the ongoing pressure on refining margins and profitability concerns. The extraordinary gains made during the previous fiscal year are being eroded as market conditions shift.
Conclusion
The Q2 results for IOC, BPCL, and HPCL reflect a challenging environment for Indian oil marketing companies amid declining refining margins and LPG losses. As these firms navigate through these turbulent times, investors will need to stay informed about market dynamics and potential recovery strategies.
Disclaimer: The views and recommendations provided in this article are those of individual analysts and do not represent the views of Mint. We advise investors to consult certified experts before making any investment decisions.
