The country's oil marketing companies (OMCs) have so far reported healthy gross refining margins (GRMs) for the September quarter. Analysts expect the trend to continue but pressure on marketing volumes for the state-run OMCs in the bulk fuel business would be a key item to look for.
So far, Reliance Industries (RIL) and two of the three state OMCs, Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOCL) have reported their numbers for the quarter. RIL reported GRM at $10.1 a barrel, lower from $10.6 a year before.
"Singapore GRMs have again improved in the October month touching $6 a barrel against the last quarter average of $5.1. The next quarter might also see the same healthy trend," said an analyst from a domestic brokerage firm, who did not wish to be identified. In the September quarter, average GRM for BPCL was $3.08 a barrel against $3.87 a year before. IOCL reported $7.19 a barrel in the April-September period, against $5.76 a barrel a year before.
Hindustan Petroleum Corporation will report its financial performance on Tuesday and analysts expect the company to report a similar trend. "We expect the GRM trend to continue for the state-run OMCs to be in the same range as seen so far and for Reliance Industries in double digits," said a second analyst from a domestic brokerage firm, who did not wish to be identified. The state OMCs might come under stress over marketing volumes and as private competition rises. Both BPCL and IOCL have reported a sequential decline in their marketing volumes for the September quarter. BPCL's sales were lower at 8.93 million tonnes, from 9.73 mt in the sequential quarter.
"Private players are capturing markets and in the bulk deal market, they have seen a significant rise," said the first analyst quoted earlier. According to an IDBI Capital report on RIL, the company's market share in bulk diesel sale improved from 3.8% in the June quarter to 4.5% in the September one. According to an October 28 report of Elara Capital on IOCL, there was a sequential decline in their marketing volumes, excluding exports, to 19.7 mt in the September quarter from 21.38 mt in the June one.
"This happened only because of some losses in the tenders for the bulk consumer business; it has not been the trend," said A K Sharma, director-finance at IOCL, in an investor call after its earnings announcement. The state OMCs might face further heat as stronger entities such as BP and Rosneft enter the retailing business. "With the increased competition, we need to see if marketing volumes or the margins come under pressure. Either of one will see an impact," said the second analyst cited earlier.