While petrol and diesel prices did not change during the period of rising raw material (crude oil) prices in April through June, this resulted in marketing losses that offset healthy refining margins, according to a report from ICICI Securities.
90% of the nation's retail sales of petrol and diesel are under the jurisdiction of the three state-owned oil marketing corporations, IOC, BPCL, and HPCL. Additionally, they are owners of refineries that transform crude oil into petrol and diesel.
While the profits from processing petroleum into fuel have been substantial, the marketing division has suffered from stable petrol and diesel prices. According to ICICI Securities, the businesses are losing ₹12–14 per litre on petrol and diesel, entirely cancelling out the good refining results for the quarter.
"We estimate gross refining margins (GRMs) to remain fairly strong at USD 17-18 per barrel levels (factoring in inventory loss of USD 0.1-0.2 a barrel) and marketing volume growth of 17-20 per cent, thanks to continued recovery in prospects and a weaker base," the brokerage said.
Yet, the sharply higher retail losses in petrol and diesel will "drive an EBITDA loss of ₹6,600 crore and a net loss of ₹10,700 crore for the OMCs in Q1FY23E (April-June quarter of 2022-23 fiscal)," it said.
Moving forward, there will be some relief for the marketing losses due to the fall in crude that was observed over the past two to three days and the subsequent decline in key product spreads.
"However, the delta from GRMs will also reduce, which limits earnings triggers for FY23E (April 2022 to March 2023)," it said.
For Reliance Industries , the brokerage saw an operationally and financially strong quarter. It projected the highest-ever consolidated EBITDA/PAT of Rs. 38,900 crore/Rs. 24,400 crore (a 67% year-over-year increase in EBITDA and a 77% increase in profit after tax, or PAT).
"These all-time highs would come on the back of a massive 80 per cent growth in oil-to-chemical segment EBITDA, sharply higher (up 100 per cent) retail EBITDA, and EBITDA growth of 26 per cent for Reliance-Jio," it said adding prospects for the next nine months would be impacted by the estimated USD 8 per barrel hit from the higher duties on fuel exports imposed with effect from July 1, 2022.
(With PTI inputs)
