India’s oil and gas companies are likely to report sharply weaker earnings for the March quarter as a global supply shock, surging crude prices and collapsing marketing margins weigh on profitability, a report by Equirus Securities said.
The quarter was marked by what Equirus described as the “single largest supply shock since 2022”, triggered by an escalation of the US-Israel conflict involving Iran and the effective closure of the Strait of Hormuz, disrupting around 20 per cent of global oil and LNG flows.
Benchmark Brent crude averaged USD 78 per barrel in the quarter, up 23 per cent quarter-on-quarter, while India’s crude basket averaged USD 82 per barrel after peaking near USD 156 intra-quarter, the report said. At the same time, the rupee weakened to Rs 91.5 per USD, increasing input cost pressures for refiners.
Despite strong refining tailwinds, including a 60 per cent surge in Singapore gross refining margins (GRMs), downstream companies are expected to see earnings decline as retail fuel margins collapsed. Petrol marketing margins fell 80 per cent quarter-on-quarter to about Rs 2 per litre, while diesel margins turned sharply negative at around Rs -12 per litre.
“This led to overall EBITDA declines of 25–70 per cent quarter-on-quarter for oil marketing companies,” Equirus said.
Among state-run refiners, HPCL is expected to be the worst hit due to steep marketing losses, while IOC may see relatively lower earnings pressure. BPCL’s refining gains are also likely to be offset by weak fuel retail margins, the report noted.
The government moved to cushion consumers by cutting excise duties on petrol and diesel and raising LPG prices by Rs 60 per cylinder to reduce under-recoveries. However, these measures provided only partial relief to companies, Equirus said.
Gas and LNG players are also expected to report weak performance due to higher input costs and lower volumes. GAIL’s EBITDA is projected to fall around 16 per cent quarter-on-quarter, while Petronet LNG may see a 17 per cent decline.
City gas distributors (CGDs) are likely to face margin compression due to rising gas costs, with Gujarat Gas expected to be the most impacted given its higher exposure to spot LNG. In contrast, MGL and IGL may be relatively insulated due to linkage to lower Henry Hub prices.
Reliance Industries is expected to deliver comparatively stable results, supported by strong refining performance, though weaker petrochemical spreads and fuel retail losses may offset gains.
Equity markets have already reflected the stress, with the BSE oil and gas index falling 14 per cent since late February, underperforming the broader market decline of around 10 per cent, the report added. |
