Future tense? Private fuel retailers may be scraping last of growth barrel

With upsides to growth via retail outlets now capped, private oil companies might look to further increase their share of the bulk diesel category, which uses the render process for procurement

Private fuel retailers in the country saw sequential market share growth in the quarter ended December 2017. However, this could well be the saturation point for them. With upsides to growth via retail outlets now capped, private oil companies might look to further increasing their share of the bulk diesel category, which uses the render process for procurement.

According to the latest data compiled from various industry sources, private fuel retailers’ current share of the petrol market is 7.11 per cent, higher than the 6.94 per cent in November last year. Similarly, in the diesel category, they control 8.58 per cent of the market, only a little more than November’s 8.56 per cent. To consider a longer period, private fuel retailers in January 2017 had a 5.99 per cent share of the petrol market and 7.6 per cent share of diesel.

“The larger trend we are seeing is that growth for private companies has now saturated,” said an official at one of the country’s three state-run oil-marketing companies (OMCs). This view on the industry is not an isolated one; analysts agree that private fuel retailers will find it difficult. “I do not see private fuel retailers succeeding in grabbing market share the way they managed until a decade earlier. There is a possibility that the state-run companies have been able to cover up the market available in the past decade with required pumps and other infrastructure,” said an oil & gas analyst with a domestic brokerage firm. The analyst added that private fuel companies had been able to make a mark by offering better prices in the bulk diesel segment, where procurement was done through the tender system. Reliance Industries (RIL), for instance, in its analyst presentation for the quarter ended December 2017, said its share of bulk high-speed diesel (HSD) market had increased to 6.7 per cent from the 5.1 per cent a year earlier.

There is a constant effort by private fuel retailers to increase their volumes. For example, RIL has started radio advertisements promoting its petrol pumps, in a first for RIL’s fuel retail segment. Analysts say the company has resumed Rs 1 discount offers at its retail outlets. An email query sent to RIL on Wednesday remained unanswered.

Oil-marketing companies like Indian Oil Corporation (IOC) are not worried. “With the largest network and presence in almost every corner of the country, the highest share of the petroleum products market in the country, along with a robust supply chain, IndianOil is best prepared to tackle competition,” the company said. IOC’s market share in the quarter ended December 2017 was at 41.4 per cent for petrol, lower than the 42.2 per cent in the March quarter. For diesel, the company’s market share during the same period fell to 41.6 per cent from 42.1 per cent. 

“In the conventional market scenario, private oil companies are definitely struggling with a saturation point. However, we are referring to RIL. The disruption we see in the telecom sector today was unimaginable a few years ago. We need to keep an eye out for the innovation RIL might come up with and change the game,” said an oil & gas analyst at a domestic brokerage firm.