Weak marketing margins drag down BPCL and HPCL Q1 earnings

New Delhi [India], July 24 (ANI): Indian public sector oil marketing companies (OMCs) faced severe pressure during the first quarter of FY27 due to rising global crude oil prices, sharp depreciation of the Indian rupee, and escalating losses on liquefied petroleum gas (LPG) sales.

Indian OMC's Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) recorded substantial financial losses in Q1 as depressed fuel marketing margins completely wiped out the gains from exceptionally strong refining margins, according to Nuvama reports.

According to the reports, BPCL posted a first-quarter EBITDA loss of Rs 41 billion and a net loss of Rs 40 billion. Although BPCL achieved a strong Gross Refining Margin (GRM) of USD 41.4 per barrel, up 8.5 times year-on-year, the performance was severely undercut by negative marketing margins on automotive fuels. Negative margins on diesel and petrol stood at Rs 25.2 per litre and Rs 7.7 per litre, respectively.

"BPCL's FY27 earnings shall deteriorate amid a challenging scenario due to West Asia war, rising LPG losses," Nuvama stated in its report.

"Moreover, high capex cycle to weigh on return ratios, making risk-reward unfavourable," the report added, noting that it cut FY27 and FY28 EBITDA estimates by 23 per cent and 10 per cent to factor in the Q1 performance and lower marketing margins.

At the time of reporting, BPCL stocks traded at Rs 308.25, down by Rs 1.60 or (-0.52%).

HPCL reported a similar trend, registering an EBITDA loss of Rs 161 billion and a net loss of Rs 115 billion for the same period. While HPCL recorded a robust GRM of USD 23.8 per barrel, an eight-fold increase year-on-year, its marketing segment suffered parallel losses of Rs 25.2 per litre on diesel and Rs 7.7 per litre on petrol.

"HPCL's FY27 earnings shall deteriorate on higher crude prices amid West Asia conflict," the report noted.

"Slower ramp up of major projects and elevated capex shall weigh on return ratios, rendering risk-reward unfavourable," Nuvama added, revising HPCL's FY27 and FY28 EBITDA estimates down by 30 per cent and 10 per cent.

At the time of reporting, HPCL stocks traded at Rs 373.60, down by Rs 11.55 or (-3.00%).

Elevated losses on LPG sales contributed heavily to the overall drain on both state-run refiners. BPCL accumulated Rs 158 billion in cumulative LPG losses during the quarter, while HPCL's cumulative LPG loss reached Rs 164 billion despite receiving an LPG subsidy payout of Rs 19.8 billion.

Operationally, BPCL recorded crude throughput of 10.1 million metric tonnes (mmt), down 3 per cent year-on-year, with domestic sales holding flat at 13.6 mmt. Marketing inventory gains of Rs 31.3 billion and a 67 per cent increase in other income provided minor relief against operating expenses.

HPCL achieved crude throughput of 6.5 mmt, down 1 per cent year-on-year, while domestic sales remained flat at 12.2 mmt. HPCL's losses were partially offset by a 145 per cent jump in other income alongside lower employee expenses, which fell 21 per cent year-on-year to Rs 7 billion. (ANI)

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