According to Motilal Oswal, OMCs will generate gross marketing margins of – Rs 1.8 a litre and – Rs 1 a litre on petrol and diesel at prevailing benchmark prices compared with Rs 2.3 and Rs 5.2, respectively, in the nine months ended December.
OMCs are making losses on petrol and diesel. The inability to pass on the cost inflation amid ongoing state elections, the brokerage said in a report, questions their independence, thereby taking valuation multiples back to the time when prices used to be regulated.
Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp. traded at an average one-year forward price-to-book value of 0.9 times, 1.4 times, and 0.8 times, respectively, during FY12-15. They are currently trading at 0.8, 1.5, and 1.0 times, respectively, on constant interventions either through excise duty revisions or during elections in key states amid rising oil prices, poor refining margin environment, and inadequate consumption of petroleum products due to the pandemic.