Indian Oil Corporation (IOC), Bharat Petroleum and Hindustan Petroleum may post a combined loss of ₹10,700 crore in the June quarter on selling petrol and diesel at rates below cost, ICICI Securities said in a report released on Monday.
While raw material - crude oil - prices soared in April-June, petrol and diesel prices were not revised in tandem, leading to marketing losses which offset strong refining margins, it said.
The three state-owned oil marketing companies -- IOC, BPCL and HPCL -- control 90% of the retail petrol and diesel sales in the country. They also own refineries that turn crude oil into fuel such as petrol and diesel.
While margins on turning crude into fuel have been high, the marketing wing accrued losses from unchanged petrol and diesel rates.
ICICI Securities said the companies were losing ₹12-14 per litre on petrol and diesel, completely offsetting the strong refining performance during the quarter.
"We estimate gross refining margins (GRMs) to remain fairly strong at $17-18 per barrel levels (factoring in inventory loss of $0.1-0.2 a barrel) and marketing volume growth of 17-20%, 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 added.
Going forward, with some decline seen in crude in the last 2-3 days and the resultant dip in key product spreads as well, some respite would be forthcoming for the marketing losses.
"However, the delta from GRMs will also reduce, which limits earnings triggers for FY23E (April 2022 to March 2023)," it said.
For Reliance Industries Ltd, the brokerage saw an operationally and financially strong quarter.
It estimated a consolidated EBITDA/PAT of ₹38,900 crore/₹24,400 crore (67% year-on-year growth in EBITDA, 77% in net profit) - the highest ever.
"These all-time highs would come on the back of a massive 80% growth in oil-to-chemical segment EBITDA, sharply higher (up 100%) retail EBITDA, and EBITDA growth of 26% for Reliance-Jio," it said, adding that prospects for the next nine months would be impacted by the estimated $8 per barrel hit from the higher duties on fuel exports imposed with effect from July 1.