Indian Oil To BPCL: Profit Misses Estimates In March Quarter

Indian oil marketing companies reported a rise in profit in fiscal 2024, even as fourth-quarter results missed analysts' estimates. While Bharat Petroleum Corp.'s profit jumped 23 times, Hindustan Petroleum Corp. turned profitable this fiscal after incurring a loss in the last one.

This has also been reflected in the stock movement of these companies, as shares of public sector undertakings surged 60–97% in the past year.

Net Profits Soar

Bharat Petroleum saw the highest standalone net profit jump of 23.26 times to Rs 26,673.5 crore in fiscal 2024 from Rs 1,870.1 crore a year ago.

Hindustan Petroleum posted a standalone net profit of Rs 14,683.83 crore in FY24, compared to a loss of Rs 8,974.03 crore in the previous fiscal.

Revenues 

A trend that was observed across all the Indian oil marketing companies was the decrease in revenues. All the companies saw a single-digit dip in revenues year-on-year led by Indian Oil Corp. that dipped 7.76%. HPCL revenue fell the least at 1.64%.

Sales Volume

While revenues did decline on an annual basis, the domestic sales volumes for all three oil marketing companies rose.

Hindustan Petroleum's sales grew in both domestic and export markets at 5.88% and 70.6%, respectively.

Ebitda Margins

Indian Oil's standalone Ebitda jumped 5.6 times to Rs 55,631.42 crore in FY24, leading to a margin expansion of 600 basis points to 7.18%.

Bharat Petroleum's Ebitda grew 4.03 times annually to Rs 44,157.05 crore, while its margins expanded 754 basis points to 9.86%. Of the three major oil marketing companies, Bharat Petroleum had the highest margins by the end of the financial year.

Hindustan Petroleum posted an Ebitda of Rs 23,016.82 crore in fiscal 2024, compared to an Ebitda loss of Rs 9,030.79 crore a year ago.

Gross Refining Margins

Indian Oil, Bharat Petroleum, and Hindustan Petroleum operate refineries as well as marketing activities.

Gross refining margin is a key metric for a refinery that helps gauge its per-unit profitability. It is calculated by subtracting the cost of crude oil from the value of the refined product. This value is then divided by the volume of crude oil processed. Higher crude prices impact GRMs negatively, and lower GRMs indicate lower profitability in an oil marketing company's refinery segment.

All three Indian OMCs saw a double-digit contraction in their gross refining margins in the financial year 2024. Indian Oil saw the highest contraction in GRMs at 38.3%, while Hindustan Petroleum saw the least at 24.9%.

However, it is important to note that Brent crude prices rose 9.67% in FY24, ranging from $71.28 to $97.69 per barrel. In FY23, Brent crude prices experienced a 26.08% decline, falling from $70.12 to $125.28 per barrel.

According to Jefferies, the lower gross refining margins were due to narrower discounts on Russian crude. The reduction in gross refining margins was in line with the trend of international product cracks, according to Hindustan Petroleum.