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From inventory losses to higher interest costs, analysts cautious on OMCs

The recent weakness in refining margins is also concerning and may pose a downside risk to our FY2020 estimates for OMCs

OMC, decline

Shares of oil marketing companies (OMCs) such as Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOC) have gained 15-45 per cent from their October lows, beating the S&P BSE Sensex by a good margin. These gains have accrued as concerns eased over the marketing margins of the public-sector OMCs. Earlier in October 2018, as crude oil prices hit a nearly four-year-high, the government asked OMCs to bear a subsidy of Rs 1 per litre on auto fuels, leading to worries of a return to the subsidy-sharing mechanism. However, as oil ...