INDIA’S three oil marketing companies — Indian Oil, BPCL and HPCL — ended FY10 in black as the government doled out mega bucks generously in the past quarter. Together, the three companies received 75% higher assistance from the government at Rs 18,110 crore in the March 2010 quarter. At the same time, the discounts extended by upstream oil companies at the behest of the government jumped more than six times to Rs 6,062 crore as against Rs 950 crore in the March 2009 quarter.
The companies were also assisted by favourable swings in the forex rates as IOCL and BPCL booked gains of Rs 890 crore as against just Rs 245 crore in the year-ago period. Better liquidity position also enabled the companies to cut down their interest costs in a big way. The interest burden of the trio went down 56% to Rs 806 crore as against Rs 1,833 crore in the March 2009 quarter.
However, despite all these heavy positives, the three companies reported a fall in their past quarter profits. Indian Oil’s net profit was 16% lower at Rs 5,557 crore while net profit figures of BPCL and HPCL were 80-85% lower against the corresponding period of last year. BPCL’s and HPCL’s profits took a particularly bad hit as they chose to write off the diminution in the value of oil bonds in the past quarter.
It was amazing to see the companies coming out with generous dividends despite their well-known cash crunch. Even after a 1:1 bonus during the year, which doubled its equity, IOC raised its dividend to Rs 13 per share from Rs 7.5 last year. Similarly, BPCL and HPCL also raised their dividends to Rs 14 and Rs 12 per share, respectively. Together, this will necessitate a cash outgo in excess of Rs 4,500 crore for the three companies.
The companies are eagerly awaiting government’s decision on the Kirit Parikh committee recommendations to be discussed by the empowered group of ministers (eGoM) on Monday, June 7, 2010. The companies could become good investment bets even for the retail investors if the retail petroleum product prices get deregulated. Due to its size, Indian Oil will be the biggest gainer if any of the recommendations is accepted. The company is currently trading at the lowest price-to-earnings multiple (P/E) compared to its peers and gives highest dividend yield at current market price, which makes it the best bet for the investors.
The companies were also assisted by favourable swings in the forex rates as IOCL and BPCL booked gains of Rs 890 crore as against just Rs 245 crore in the year-ago period. Better liquidity position also enabled the companies to cut down their interest costs in a big way. The interest burden of the trio went down 56% to Rs 806 crore as against Rs 1,833 crore in the March 2009 quarter.
However, despite all these heavy positives, the three companies reported a fall in their past quarter profits. Indian Oil’s net profit was 16% lower at Rs 5,557 crore while net profit figures of BPCL and HPCL were 80-85% lower against the corresponding period of last year. BPCL’s and HPCL’s profits took a particularly bad hit as they chose to write off the diminution in the value of oil bonds in the past quarter.
It was amazing to see the companies coming out with generous dividends despite their well-known cash crunch. Even after a 1:1 bonus during the year, which doubled its equity, IOC raised its dividend to Rs 13 per share from Rs 7.5 last year. Similarly, BPCL and HPCL also raised their dividends to Rs 14 and Rs 12 per share, respectively. Together, this will necessitate a cash outgo in excess of Rs 4,500 crore for the three companies.
The companies are eagerly awaiting government’s decision on the Kirit Parikh committee recommendations to be discussed by the empowered group of ministers (eGoM) on Monday, June 7, 2010. The companies could become good investment bets even for the retail investors if the retail petroleum product prices get deregulated. Due to its size, Indian Oil will be the biggest gainer if any of the recommendations is accepted. The company is currently trading at the lowest price-to-earnings multiple (P/E) compared to its peers and gives highest dividend yield at current market price, which makes it the best bet for the investors.
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