India's biggest company Reliance Industries Ltd and UK's BP plc formalising plans to set up up petrol pumps under Jio-BP brand will impact market share of state-owned fuel retailers, Morgan Stanley said in a research report.
Reliance and BP last week announced further details of their retail fuel partnership, in which the British firm has taken 49 per cent stake for USD 1 billion.
The tie-up will see RIL's 1,400 existing pump stations being ramped up to 5,500 over five years. It also will increase the lucrative aviation fuel stations from 30 to 45.
"Targeted fuel station additions would be nearly equivalent to two-thirds of annual station additions by (state-owned) oil marketing companies (OMCs)," it said. "This should also help RIL sell more refined products domestically as refinery export restrictions ease."
"We have currently seen limited plans by OMCs on this front, however current regulations on the setup of electric charging infrastructure favour OMCs considering their reach."
"Also, contrary to the market's belief that retail fuel margins will weaken due to competition, we believe they can expand over the medium term towards regional averages, which are 1.5-2x higher than in India," it said. "If the RIL-BP venture hits its target for fuel stations, it would account for nearly 8 per cent of pump stations by 2025. We see an impact on OMCs' market share both in aviation and auto fuels."
"Bharat Petroleum Corp Ltd (BPCL), which has the highest exposure to highways, could see more aggressive pricing as RIL-BP would target these areas where throughput per outlet is higher," it said. "We see limited impact to HPCL considering its higher exposure to cities, which are normally tougher for new players to enter considering long-term leases even for dealer-operated stations."
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