Strong marketing margin and higher profitability, how OMC stocks look oiled up for revival in second half of FY2025
Oil marketing companies (OMCs) weighed down the performance of corporate India in the September quarter. The weak performance of the refining segment, inventory losses and significant LPG under-recoveries contributed to the poor show. The three OMCs—Bharat Petroleum Corporation (BPCL), Hindustan Petroleum (HP) and Indian Oil Corporation (IOC)—reported a combined consolidated net profit of Rs.1,991.1 crore, falling by 92.8% year on year.
The impact of OMCs on India Inc.’s overall performance can be assessed by comparing the aggregate PAT growth of all companies in the BSE 500 index and the index’s aggregate PAT growth (excluding OMCs). The data from Reuters-Refinitiv for 498 companies in the BSE 500 index shows a 1.7% y-o-y decline in the aggregate consolidated net profits (not adjusted for extraordinary items). After excluding OMCs, the aggregate net profit growth improves to 5.6% y-o-y. However, after the poor September quarter, the performance is set to improve in the second half of 2024-25. Recent reports from multiple brokerage houses, such as ICICI Securities, Prabhudas Lilladher, Antique Stock Broking, Motilal Oswal, and YES Securities, have been positive on the performance of OMCs.
What led to poor show?
The refining segment was muted amid the excess supply and demand concerns (especially from China). The benchmark Singapore GRMs (gross refining margins) averaged $3.7/barrel in the September 2024 quarter, compared to $9.6/barrel in the September 2023 quarter. A fall in crude oil prices led to inventory losses. The Brent crude averaged $78.71/barrel in the second quarter of 2024-25, compared to $85.92/barrel in the corresponding period of the previous year.
