High oil prices to weaken profitability of 3 PSU oils firms, says Moody’s

‘Profitability will weaken as feedstock costs rise and selling prices remain unchanged’

October 07, 2023 09:29 pm | Updated 09:30 pm IST - MUMBAI

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, says Moody’s.

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, says Moody’s. | Photo Credit: BY ARRANGEMENT

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.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.