High crude oil prices will weaken the profitability of the three state-owned oil marketing companies in India — Indian Oil Corporation Ltd. (IOCL), Bharat Petroleum Corporation Ltd. (BPCL) and Hindustan Petroleum Corporation Ltd. (HPCL), said Moody’s in a report.
“The three companies will have limited flexibility to pass on higher raw-material costs by increasing the retail selling prices of petrol and diesel in the current fiscal year because of upcoming elections in May 2024,” Moody’s said.
“Profitability will weaken as feedstock costs rise and selling prices remain unchanged. The three companies’ fiscal 2024 earnings will remain strong and higher than historical levels, even if crude oil prices remain at current levels of $85/bbl-$90/bbl in the second half of fiscal 2024,” the rating agency said.
“We estimate that the OMCs will start incurring EBITDA losses in the second half of fiscal 2024 if crude oil prices increase to around $100/bbl. Nonetheless, we believe high oil prices are unlikely to be sustained for long as global growth weakens,” it added.
