State-Run Oil Marketers’ Debt Rises The Most In Over A Decade

The total debt of three state-run oil marketers rose the most in more than a decade as the government is yet to pay them subsidy dues.The combined debt of Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd. jumped 39 percent year-on-year to nearly Rs 1,42,700 crore as of March 2019, according to data compiled by BloombergQuint. Their leverage ratio, or total debt-to-Ebitda, stood at 2.5 times compared with 1.6 times in 2017-18.The government reimburses oil marketing companies for a shortfall in revenue through subsidies on liquified petroleum gas and kerosene. It had budgeted the petroleum subsidy at Rs 24,833 crore in the last financial year. But crude oil prices rose during the year. Also, the companies haven’t yet received the full subsidy payment allocated in the budget, managements told BloombergQuint after the announcing the fourth-quarter earnings.The unpaid dues, along with higher payouts to shareholders and a rise in capital expenditure, added to the oil retailers’ debt..Indian Oil Borrows More As Government Fails To Clear Subsidy Dues.Higher Operating Profit.The operating profit of oil marketing companies surged in the quarter ended March, aided by inventory gains and higher gross marketing margins.Inventory gains of the three state-run companies stood at Rs 3,914 crore compared with an inventory loss of Rs 17,542 crore in the three months ended December. That’s because the crude surged 30 percent in the March quarter—fetching the companies higher price for inventory bought at lower rates. However, adjusting for inventory gains, barring Bharat Petroleum, the other two reported a drop in their core earnings before interest, tax, depreciation and amortisation..The oil marketers also earned a higher gross marketing margin on sale of every litre of petrol and diesel during the March quarter. The marketing margin stood at Rs 5.8 a litre—the highest in at least four years.But the gross refining margin—the amount earned for converting a barrel of crude into fuel—fell even as oil prices rose. The Singapore GRM, the Asian benchmark, averaged around $3.2 per barrel—the lowest in at least six years..Mixed First Quarter?.Though the oil marketers reported a strong January-March earnings, they have had a mixed first quarter of 2019-20.Petrol and diesel prices have not moved in tandem with Brent crude so far in the first quarter because of general election. While crude rose more than 5 percent from the start of April, retail petrol and diesel rates fell by 2 percent and 0.3 percent, respectively. That led to lower gross marketing margins.The gross marketing margin earned on petrol and diesel fell to Rs 1.4 a litre and Rs 3.2 a litre, respectively, so far in the first quarter, data compiled by BloombergQuint showed. That may hurt Hindustan Petroleum and Bharat petroleum the most as retail sale of fuel, according to BloombergQuint’s calculations, contributes nearly 60 percent and 40 percent, respectively, to their operational profit..After the election, however, oil marketers may hike fuel prices for the rest of the quarter, aiding the overall earnings.Brent crude, which has averaged higher till now, may also help the companies to report inventory gains. Crude has averaged at $71.37 a barrel so far against $63.68 a barrel as of March.What will help them further is that gross refining margins have risen from their lows in the previous quarter. The Singapore GRM has averaged around $3.8 a barrel so far in the ongoing quarter.

State-Run Oil Marketers’ Debt Rises The Most In Over A Decade

The total debt of three state-run oil marketers rose the most in a more than a decade because...

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