The earnings of the three oil marketing companies (OMCs) — Indian Oil, BPCL and HPCL — for the quarter to June indicate that their troubles will continue, making them unattractive investments. The higher subsidy burden that upstream or state-owned exploration firms have to bear also makes them poor bets. For the April-June quarter, the government underwrote just 34.3% of the industry’s total underrecovery of Rs 25,579 crore, while upstream companies bore 65.7%, a reversal of trend compared to the earlier practice of the government funding 62.5% of FY13 underrecoveries and 60.4% in FY12.
Yet, OMCs ended up absorbing a part of the under-recoveries. Within the trio, BPCL’s ability to trim expenses significantly enabled the oil major to report marginal profits. However, Indian Oil and HPCL both reported losses.
These state-owned companies have lost between 15% and 35% during the past three months and are no longer attractive from a long-term investment perspective.
Yet, OMCs ended up absorbing a part of the under-recoveries. Within the trio, BPCL’s ability to trim expenses significantly enabled the oil major to report marginal profits. However, Indian Oil and HPCL both reported losses.
These state-owned companies have lost between 15% and 35% during the past three months and are no longer attractive from a long-term investment perspective.
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