Moodys says EBITDA of IOCL, HPCL and BPCL will be down by 9% owing to fuel-cut

Last Updated: Mon, Oct 08, 2018 18:28 hrs
Indian Oil

Ratings agency Moodys has expressed that the central government's latest benefit to motorists is likely to leave a 9% hole in the coffers of oil marketing companies, namely Indian Oil, Hindustan Petrochemicals and Bharat Petroleum.

The rating agency said that a discount of Rs 2.50 per litre on petrol and diesel translated into a loss in EBITDA margins.

The government while announcing the concession had asked the OMCs to absorb a one rupee loss on every liter of fuel that they retailed.

Moody's analysts explained in a note, "We estimate that the government's decision will reduce the combined EBITDA (earnings before interest, tax, depreciation and amortisation) of the three OMCs by INR 65 billion (Rs 6500 crore) in fiscal 2019, which ends in March 2019, which is around 9% of their total EBITDA of INR 692 billion (Rs 69200 crore in fiscal 2018)."

The rating agency however clarified that this benefit to consumers may not result in a loss for the OMCs. In fact, crude prices that have peaked to high are expected to boost margins.

"Despite the negative earnings effect of the government's decision, we continue to expect the three OMCs to report higher EBITDA in fiscal 2019 versus fiscal 2018, given higher sales volume, stable refining margins and the depreciating Indian rupee," the report added.

The three OMCs account for nearly 95% of the country's retail sales.

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