India's state-run oil marketing companies (OMCs) reported sharply contrasting June quarter performances, with Bharat Petroleum Corporation Ltd. (BPCL) delivering a much stronger-than-expected earnings performance, while Hindustan Petroleum Corporation Ltd. (HPCL) reported a weaker operational showing despite both companies being hit by suppressed fuel marketing margins.
The losses were widely anticipated during the quarter as government-led pricing constraints squeezed gross marketing margins on petrol and diesel.
BPCL Delivers Strong Earnings Beat
BPCL reported an Ebitda loss of Rs 4,080 crore for the June quarter, significantly better than the Bloomberg estimate of an Ebitda loss of Rs 13,713 crore. The company also posted a net loss of Rs 3,960 crore, substantially lower than the consensus estimate of a Rs 12,632 crore loss.
ALSO READ: HPCL Q1 Results: OMC Posts Lower-Than-Expected Loss Of Rs 11,526 Crore; Revenue Up 17%
According to analysts, BPCL's better-than-expected performance was driven by lower other expenditure, stronger gross refining margins (GRMs) and lower inventory losses during the quarter. The company also benefited from a foreign exchange gain of around Rs 350 crore, which boosted other income.
However, BPCL's debt increased by Rs 6,920 crore sequentially to Rs 17,396 crore at the end of the quarter.
HPCL Reports Weaker Quarter
HPCL reported an Ebitda loss of Rs 16,140 crore during the quarter, wider than the Bloomberg estimate of a Rs 12,672 crore loss. The company posted a net loss of Rs 11,530 crore, although it was marginally better than the consensus estimate of a Rs 12,296 crore loss.
Analysts said HPCL's earnings were hit harder because of its relatively higher dependence on the fuel marketing business, where margins remained under pressure during the quarter. While HPCL's gross refining margin improved sharply to $23.8 per barrel from $14.3 per barrel in the previous quarter, the benefit was not enough to offset weakness in the marketing segment.
HPCL's debt also rose sharply, increasing by around Rs 25,000 crore quarter-on-quarter to Rs 72,600 crore.
Marketing Margins Remain The Key Driver
The June quarter highlighted the importance of fuel marketing margins for India's oil marketing companies.
Despite healthy refining margins, the suppression of petrol and diesel marketing margins had a significant impact on profitability. BPCL was able to cushion the impact through lower costs, smaller inventory losses and forex gains, while HPCL's greater reliance on the marketing business resulted in a much weaker operational performance.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.