Indian Express Daily
Buisness

Reduced fuel prices to avoid hurting margins: Chairman of IOCL

<p>According to Indian Oil Chairman Shrikant Madhav Vaidya, the company’s marketing margins are not expected to be impacted by the recent reduction in the price of gasoline and diesel. Speaking to reporters here, Vaidya said, “We should not have much impact on the bottom lines.” He also added that the firm would be able to make decisions on future price reductions after it has seen how the price of crude oil behaves globally.</p>
<p><img decoding=”async” class=”alignnone wp-image-517591″ src=”https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-reduced-fuel-prices-to-avoid-hurting-margins-chairman-of-iocl-iocl-11zon-750×422.jpg” alt=”theindiaprint.com reduced fuel prices to avoid hurting margins chairman of iocl iocl 11zon” width=”997″ height=”562″ title=”Reduced fuel prices to avoid hurting margins: Chairman of IOCL 3″ srcset=”https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-reduced-fuel-prices-to-avoid-hurting-margins-chairman-of-iocl-iocl-11zon-750×422.jpg 750w, https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-reduced-fuel-prices-to-avoid-hurting-margins-chairman-of-iocl-iocl-11zon-768×432.jpg 768w, https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-reduced-fuel-prices-to-avoid-hurting-margins-chairman-of-iocl-iocl-11zon-390×220.jpg 390w, https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-reduced-fuel-prices-to-avoid-hurting-margins-chairman-of-iocl-iocl-11zon.jpg 1024w” sizes=”(max-width: 997px) 100vw, 997px” /></p>
<p>Furthermore, economists predict that the drop in motor gasoline costs would only have a little effect on the OMCs’ profitability.</p>
<p>According to Emkay Global Financial Services’ research, “the cut is within the comfort zone (petrol cut was lower than our greater Rs 3 per litre expectation) and would not impact our FY24E earnings for IOCL, BPCL, and HPCL.” The company anticipates that the ensuing margin hit would only last for around two months.</p>
<p>Additionally, according to ICICI Securities, the retail fuel margins of the OMCs—Rs. 2 for diesel and Rs. 4 for gasoline—will be mostly stable.</p>
<p>Without a doubt, this is a significant drop from the 9MFY24 average of Rs 7.2 per liter.</p>
<p>for gasoline and Rs 2.6 per litre for diesel, but with a mere 15-day impact for March, the drop has no appreciable effect on FY24E blended margins, the statement said.</p>
<p>Once the national elections are completed, analysts predict more deregulation with daily pricing returning with adequate flexibility to make up for any underrecovery.</p>
<p>“Sentiments will probably be impacted by changes in the price of oil during the next two months. Any decline in stock prices, in our opinion, would provide a compelling entry moment. Therefore, we continue to take a positive stance on OMCs,” Emkay Global said.</p>
<p>According to experts at Emkay Global, after the cut, the gross marketing margin blow to OMCs is about Rs 1.6-1.7 per litre, with petrol priced at Rs 5.0 and diesel at Rs 1.4.</p>
<p>“After the national elections, we would return to a normalized margin scenario, with higher opex over the years likely to set margins higher than Rs3–4/ltr. This cut will be effective for the next two to three and a half months,” the statement said.</p>
<p>Prabhudas Lilladher analysts predict that OMCs’ strong gross refining margins will persist because of insufficient global capacity development.</p>
<p>“In the near future, we expect that GRMs will remain high since several Russian refineries are now running below capacity as a result of the continuing hostilities. But going forward, we anticipate a prolonged market oversupply,” the company said.</p>
<p>Furthermore, economists anticipate that the government will give OMCs considerable latitude to generate strong returns starting in FY25 and beyond, with the only real risk being large increases in crude oil prices. OMCs are aiming for net-zero by 2040 and new capital plans.</p>
<p>The announcement of a Rs 2 reduction in car gasoline prices caused the shares of the three OMCs to plummet by 8% early on Friday morning. Hindustan Petroleum Ltd.’s share price dropped 7.73% to Rs 461.50.</p>
<p>Indian Oil Corporation saw a sharp decline of over 5.07% to Rs 161.80 during the session, from its previous close of Rs 170.45, while Bharat Petroleum Ltd down more than 5.43% to Rs 575.70 on Friday, from its previous close of Rs 609 on Thursday.</p>
<p>After April 2022, the OMCs have not lowered the price of motor gasoline before.</p>

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