<ul><li>Hindustan Petroleum (HPCL) shares gained over 7% after the oil refining and marketing giant approved the buyback of 10 crore shares.</li><li>The second-quarter net profit of HPCL more than doubled, led by the surge in refining margins and inventory gains</li><li>The gross sales revenue stood at ₹61,340 crore and was lower than ₹66,165 crore of Q2 of the previous financial year due to lower oil prices.</li></ul>The shares of Hindustan Petroleum (HPCL) gained over 7% after the oil refining and the marketing giant said that its board had approved a proposal to buyback up to 10 crore shares, representing 6.56% of paid-up equity capital of the company, at ₹250 per share. The buyback price represents a 33.88% premium over HPCL’s last closing price on Wednesday. In a regulatory filing on the BSE, HPCL said that the buyback remains at ₹2,500 crore, but the number of shares could be higher than maximum buyback shares (10 crore) if equity shares are bought below the maximum buyback price of ₹250. <div type="image" title="HPCL" msid="79055262" hostid="261"></div> Through the buyback, HPCL’s minority shareholders are looking to get rewarded. The company will finalise the details of the buyback in the next two days. Strong profit growth is the secondary driver The second-quarter net profit of HPCL more than doubled on the back of a surge in refining margins and inventory gains — which is again the other major reason behind HPCL stock rise today. Net profit in July-September came at ₹2,477 crore as compared to ₹1,052 crore a year back, HPCL Chairman and Managing Director Mukesh Kumar Surana told the media on a conference call. “The significant improvement in the profitability in spite of challenges including lockdown due to COVID-19 pandemic was a result of strategic planning in refinery and marketing operation, containing the degrowth to less than the industry, efficient inventory management and effective production placement,” he said. Cheaper crude oil contributed to strong growth The gross sales revenue stood at ₹61,340 crore and was lower than ₹66,165 crore of Q2 of the previous financial year due to lower oil prices. The firm earned $5.11 on turning every barrel of crude oil into fuel in the second quarter of 2020-21 fiscal as compared to a gross refining margin of $2.83 a barrel. This included a $2.33 per barrel inventory gain from buying cheaper crude oil earlier and processing in Q2. This translated into ₹1,780 crore of gain. Besides, the firm also had a forex gain of ₹524 crore, he said. The company said during the quarter, 303 new retail outlets were commissioned taking the total retail outlet network to 17,171 as of September 2020. HPCL also commissioned 37 new LPG distributorships during the quarter, taking the total LPG distributorships to 6,153 as of September 2020. (with inputs from wire services) SEE ALSO: <a href="https://www.businessinsider.in/business/ecommerce/news/heres-what-gives-jiomart-an-edge-over-its-competitors-according-to-goldman-sachs/articleshow/79054698.cms" data-type="tilCustomLink">Here’s what gives JioMart an edge over its competitors, according to Goldman Sachs</a> <a href="https://www.businessinsider.in/stock-market/news/top-stock-movers-sbi-hcl-tech-srf-basf-happiest-minds-tech-pidilite-pvr-inox-leisure-and-others/articleshow/79054766.cms" data-type="tilCustomLink">Top stock movers — SBI, HCL Tech, SRF, BASF, Happiest Minds Tech, Pidilite, PVR, INOX Leisure, and others</a> <a href="https://www.businessinsider.in/india/news/toxic-haze-chokes-delhi-pollution-levels-enter-severe-zone-highest-since-november-last-year/articleshow/79054990.cms" data-type="tilCustomLink">Toxic haze chokes Delhi, pollution levels enter 'severe zone' – highest since November last year</a>

Here’s why Hindustan Petroleum shares rallied over 7% today

New Delhi, Feb 5 () Hindustan Petroleum Corp Ltd (HPCL) on Wednesday reported trebling of net profit in December quarter as inventory gains made up for lower refinery margins.Net profit in October-December at Rs 747 crore was higher than net profit of Rs 248 crore in the same period a year back, HPCL Chairman and Managing Director Mukesk K Surana told reporters here."In Q3 of the last fiscal we had an inventory loss of Rs 3,465 crore. As compared, we made an inventory gain of Rs 343 crore," he said, adding the inventory gains were partly offset by lower exchange gains.HPCL had a foreign exchange gain of Rs 82 crore in the December quarter as compared to a forex gain of Rs 557 crore a year back, he said.A company records inventory gain when it buys raw material (crude oil) at a particular price but by the time it is able to process and convert it into fuel, international oil prices have gone up. Since fuel prices are benchmarked to international rates, inventory gains are booked. Inventory losses are booked when the reverse happens.The company earned USD 1.79 on turning every barrel of crude oil into fuel in Q3 as compared to a gross refining margin of USD 3.72 per barrel a year back."The lower GRM is primarily due to lower cracks of fuel oil and LPG and planned shutdown of secondary units at Visakh refinery," he said.Sales was also lower at Rs 74,288 crore in October-December as against turnover of Rs 76,884 crore. ANZ BALBAL

HPCL net trebles on inventory gains

<ul><li>The SGX Nifty was trading 0.81% lower at 7:55 am, indicating a negative start for Nifty50. </li><li>Here’s a list of stocks to watch for in trade today. </li><li><a href="https://www.businessinsider.in/">Check out the latest news and updates on Business Insider. </a></li></ul>Even amid positive cues from the global markets, the Indian equities are likely to open in the red on Thursday. The SGX Nifty was trading 0.81% lower at 7:55 am, indicating a negative start for Nifty50. However, the US stock markets also soared on Wednesday, as investors shrug off the undecided election. The Dow Jones Industrial Average closed 368 points higher, and the S&amp;P 500 gained 2.2%. These are the stocks to watch out for during the trading session on November 5: PVR and Inox Leisure PVR and Inox Leisure stocks will be in focus during the trade today after <a href="https://www.businessinsider.in/india/news/maharashtra-government-allows-reopening-of-cinema-halls-with-50-capacity-from-november-5/articleshow/79041693.cms?upcache=2">the Maharashtra Government has now allowed cinema halls</a> to open in areas outside containment zones with 50% of their seating capacity from today. The shares of PVR and Inox Leisure ended 1% and 2% higher on Wednesday, respectively. HPCL The board of the Hindustan Petroleum (HPCL) approved a ₹2,500 crore share buyback plan as the company management feels the share price is lower than the value it deserves. In a stock exchange filing, HPCL said it would buy back up to 10 crore shares for no more than ₹250/share. The net profit of the company also nearly doubled in the second quarter led by a surge in refining margins and inventory gains. The net profit in July-September stood at ₹2,477 crore as compared to ₹1,052 crore in a year-ago period. The shares of HPCL ended 0.83% higher on Wednesday, SBI Cards SBI Cards and Payment Services (SBI Card) has launched credit cards in partnership with the digital payment platform Paytm. Available in two variants, Paytm SBI Card and Paytm SBI Card SELECT, the product has been launched on the Visa platform. The shares of SBI Cards ended 0.53% higher on Wednesday, JK Lakshmi JK Lakshmi Cement reported an 86.90% rise in consolidated net profit to ₹92.93 crore for the second quarter ended September 30, helped by cost reduction. The revenue from operations rose 11.79% to ₹1,131.74 crore during the quarter under review. The shares of JK Lakshmi ended 4% higher on Wednesday, Jubilant Life Sciences The board of Jubilant Life Sciences approved raising up to ₹100 crore via non-convertible debentures (NCD). The shares of Jubilant Life Sciences ended 2% higher on Wednesday, Pidilite Industries Fevicol maker Pidilite Industries reported a 9.66% increase in consolidated net profit to ₹356.44 crore for the quarter ended September 30. The company’s revenue from operations rose 4.08% at ₹1,880.33 crore during the quarter under review. The shares of Pidilite Industries ended 0.36% lower on Wednesday, Aditya Birla Capital, Adani Power, Berger Paints India and Emami Aditya Birla Capital, Adani Power, Berger Paints India and Emami are slated to report their second-quarter earnings today. SEE ALSO:<a href="https://www.businessinsider.in/politics/world/news/here-are-trump-and-bidens-paths-to-victory-based-on-where-the-election-currently-stands/articleshow/79044299.cms" data-type="tilCustomLink"> How Trump and Biden can win based on where the election stands now</a> <a href="https://www.businessinsider.in/business/auto/news/india-may-announce-vehicle-scrappage-policy-soon-and-this-is-what-it-means-for-consumers-and-new-buyers/articleshow/79041346.cms" data-type="tilCustomLink">India is looking to bring in the vehicle scrappage policy soon — here’s what it means for you</a> <a href="https://www.businessinsider.in/finance/banks/news/sbis-profit-jumps-over-50-in-q2-plans-to-outperform-the-industry-in-credit-growth/articleshow/79039165.cms" data-type="tilCustomLink">SBI’s profit jumps over 50% in Q2 — India’s largest bank plans to outperform the industry when it comes to credit growth</a>

Top stocks to watch — PVR, Inox Leisure, SBI Cards, HPCL, Pidilite Industries, Adani Power, Berger Paints, and others

New Delhi, Jan 6 () Fitch Ratings on Monday said it expects Hindustan Petroleum Corp Ltd's (HPCL) refining margins to fall by one-third during the current fiscal due to volatility in crude prices leading to inventory losses.
Fitch affirmed HPCL's rating 'BBB-' with stable outlook, in line with the credit profile of its largest shareholder Oil and Natural Gas Corp Ltd (ONGC).
"The agency assesses HPCL's standalone credit profile at 'bb' to reflect its position as one of India's biggest oil-marketing companies, average-but-improving complexity of its refining assets and moderate financial profile," Fitch said in a statement.
HPCL, it said, is highly strategic to ONGC's vertical integration strategy, and its refining capacity, along with its large fuel retail network, increases ONGC's downstream integration, making the company India's third-largest oil-refining and fuel-marketing company.
The investment in HPCL is also ONGC's largest. ONGC in January 2018 paid Rs 36,915 crore to acquire 51 per cent stake in HPCL from the state. "We believe there is a high likelihood of exceptional support from ONGC to HPCL should the subsidiary face financial difficulties," it added.
HPCL has about one-fourth market share of India's fuel marketing, and the second-largest number of retail fuel outlets. With its refining capacity of 27 million tonnes per annum (mtpa), including 11 mtpa of capacity in its joint venture, HPCL-Mittal Energy Ltd is set to increase it to 36 mtpa within the next 12 months, and accounts for over 10 per cent of the country's refining capacity.
HPCL marketed about 19.5 million tonnes of fuel in the six months ended September 30, 2019 and refined 8.5 million tonnes. "We expect HPCL to maintain its leading position over the medium term in light of its expansion plans," it said.
Fitch expected HPCL to incur around Rs 60,000 crore in capex over FY20-FY23 to expand and upgrade its refineries, while also enhancing its retail and pipeline infrastructure.
"We expect these investments to improve HPCL's refining asset quality and business profile over the long term," it said. "However, we expect the investment plans to result in negative free cash flows over the medium term, driving up leverage."
HPCL's Mumbai refinery capacity will increase from 7.5 mtpa currently to 9.5 mtpa by end-January 2020, and that at the Visakhapatnam refinery will rise from 8.3 mtpa at present to 15 mtpa in July 2020.
"Fitch expects HPCL's standalone gross refining margins (GRM) to fall to USD 3.2 a barrel in FY20 from USD 5.0 a barrel in FY19. GRMs for HPCL's refining segment fell to USD 1.9 per barrel during 1HFY20," the statement said. "This was in line with the industry due to strong new supply from China, volatility in crude prices leading to inventory losses, and unfavourable movement in the light-heavy crude spreads."
However, Fitch expected the margins to gradually improve from 2HFY20, benefitting from strong diesel spreads, driven by new global marine-fuel regulations as HPCL has a higher share of middle distillates in its refining product slate that meet the requirements.
Its GRMs should also benefit over the medium term from the completion of modernisation and expansion of its refineries, improving their Nelson Complexity Index to 10 from an average of around 8 currently.
HPCL's standalone credit profile is one notch lower than the 'bb+' of both Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL).
IOC and BPCL are larger, have greater vertical integration and a better balance between refining and marketing volumes than HPCL, justifying the one-notch difference, although the SCPs of all three have low headroom in their financial metrics, Fitch said. ANZ BAL

Fitch says HPCL refining margins to fall in current fiscal

State-owned Bharat Petroleum Corporation Ltd (<keyword id="19908646" type="General" weightage="100" keywordseo="bpcl" source="keywords">BPCL</keyword>) on Monday reported an 82% jump in its December quarter net profit on the back of higher-than-expected refining margins and a rise in margins on fuel sales. Its consolidated net profit of Rs 3,181.42 crore in October-December - the third quarter of the current fiscal year, stated on April 1, 2023 - compares to Rs 1,747.01 crore earnings in the same period of the previous financial year, according to a company statement. Its profit was, however, lower than Rs 8,243.55 crore earnings in the preceding quarter (July-September 2023). The continuing freeze in fuel prices, which is now 21 months old, despite a fall in input raw material (crude oil) prices helped raise marketing margins. BPCL earned an estimated USD 13.3 on turning every barrel of crude oil into fuel like petrol and diesel during October-December. Pre-tax earnings from fuel marketing soared to Rs 4,372.93 crore in the third quarter from Rs 2,618.95 crore a year back but lower than the record Rs 11,283.29 crore in the July-September period. Its revenue from operations was slightly lower at Rs 1.3 lakh crore. In 2022, state-owned fuel retailers Indian Oil Corporation (IOC), BPCL and Hindustan Petroleum Corporation Ltd (HPCL) froze prices, despite a spike in global oil rates, following Russia's invasion of Ukraine. This was with a view to insulate consumers from price volatility. The price freeze led to the three firms incurring losses in the first half of the 2022-23 fiscal (April 2022 to March 2023). When prices started to fall last year, they recouped the previous year's losses, and the same continues even now. Profitability soared in the July-September quarter, but inventory losses in the subsequent three months tempered earnings. BPCL's marketing margin in October-December is estimated at Rs 3.5 per litre. The company turned 9.86 million tonnes of crude oil into fuel in the third quarter, up from 9.39 million tonnes a year back and 9.35 million tonnes in the preceding quarter. Fuel sales were almost flat at 12.92 million tonnes in October-December when compared to year-on-year, but were higher than 12.19 million tonnes in the preceding quarter. During the first nine months of the current fiscal, the company recorded its highest-ever net profit of Rs 22,069.27 crore as opposed to a loss of Rs 4,739.42 crore in April-December 2022. Gross refining margins (GRM) for the April-December period was USD 14.72 per barrel against USD 20.08 a barrel in the corresponding comparative period. EBITDA for the nine months of FY24 reached Rs 36,887.35 crore, an increase from Rs 1,253.93 crore in the first three-quarters of FY23. The EBITDA margin was 9.84% in the first nine months of FY24, compared to 0.31% in the corresponding period of FY23. EBITDA for Q3 FY24 at Rs 6,906.37 crore was higher than Rs 4,685.82 crore in Q3 FY23. BPCL expanded its retail network by adding 501 new fuel stations, bringing the total network strength to 21,532. A total of 112 CNG stations were commissioned, raising the total to 1,711 CNG stations as of December 31, 2023. BPCL chairman and managing director <keyword id="20373329" type="General" weightage="20" keywordseo="g-krishnakumar" source="keywords">G Krishnakumar</keyword> said the company "delivered another quarter of resilient performance with strong operating fundamentals amidst a challenging operating environment. Our focus remains on driving competitive volume growth and achieving operational excellence, whilst stepping up investment towards our long-term strategic priorities".

BPCL Q3 net profit jumps 82% on higher refining, market margins

The ongoing quarterly earnings report card of corporates, global trends and trading activity of foreign investors are key factors to drive the momentum in the <keyword id="145517" type="General" weightage="20" keywordseo="equity-markets" source="Orion">equity markets</keyword> this week, <keyword id="49628" type="General" weightage="20" keywordseo="analysts" source="Orion">analysts</keyword> said. Moreover, markets would also focus on global <keyword id="6359072" type="General" weightage="20" keywordseo="oil" source="Orion">oil</keyword> benchmark Brent crude and the rupee-dollar trend. "On the domestic front, the upcoming release of Q2 earnings report is expected to have a significant influence on market sentiment. If FIIs (Foreign Institutional Investors) shift to net buying, it could further propel the market's upward movement," Swastika Investmart Ltd Head of Research Santosh Meena said. While geopolitical concerns persist, they have had limited impact on the market's overall trajectory, Meena said, adding that the resilience of global markets will be crucial in determining the sustainability of this positive momentum. From the <keyword id="493702" type="General" weightage="20" keywordseo="macroeconomic" source="Orion">macroeconomic</keyword> front, the industrial production data is scheduled to be announced on Friday after market hours. "Global and domestic macroeconomic events, FII, DII (Domestic Institutional Investors) investment pattern, crude oil inventories, movement of the rupee against the dollar, US bond yield, the ongoing Israel-Hamas conflict, the ongoing Q2 earning season will dictate the trend in the market this week," Arvinder Singh Nanda, Senior Vice President, Master Capital Services Ltd, said. Some major companies will be announcing their quarterly number in the coming days, such as HPCL, NHPC, IRCTC, Power Grid, Tata Power, Ashok Leyland, Coal India, Hindalco, LIC, Mahindra &amp; Mahindra, Tata Chemicals, Nanda said. Last week, the <keyword id="657965" type="General" weightage="20" keywordseo="bse-benchmark" source="Orion">BSE benchmark</keyword> jumped 580.98 points, or 0.91 per cent, while the Nifty climbed 183.35 points, or 0.96 per cent. The 30-share BSE Sensex climbed 282.88 points, or 0.44 per cent, to settle at 64,363.78 on Friday. The Nifty went up 97.35 points, or 0.51 per cent, to 19,230.60. "The optimism is buoyed by firm global clues, steady macroeconomic data and strong domestic corporate earnings. Clues that Fed is unlikely to hike rates in the future and modest decline in oil prices are adding to the optimism," Vinod Nair, Head of Research at Geojit Financial Services, said on Friday.

Q2 earnings, global trends, trading activity of foreign investors to drive market movement: Analysts

<ul><li>This profit growth of Indian Oil comes on the back of a spectacular recovery in operating margins that went up to 8.6%.</li><li>As crude prices fell, the margins of the oil marketing major rose as selling prices remained the same.</li><li>Its core gross refining margin for the quarter came in at $9.05 per barrel. </li></ul>India’s largest oil marketing company Indian Oil posted a multifold rise in consolidated net profit on Friday. The first quarter reading of ₹14,735 crore, as compared to ₹882.9 crore posted in the same quarter last year, largely beat analyst expectations. This profit growth comes on the back of a spectacular recovery in operating margins that went up to 8.6% for the quarter, as compared to -0.59% posted in the same quarter last year. The falling crude prices have come as a boon for all the Indian PSU oil marketing companies as their margins have improved from the negative territory in the same period last year. “The average gross refining margin (GRM) for the period April- June 2023 is $8.34 per barrel. The core GRM or the current price GRM for Q1 after offsetting inventory loss/ gain comes to $9.05 per barrel,” the company said. GRM is a way to calculate economics of oil refining and is the difference between crude oil price and total value of petroleum products produced by the refinery. IOC’s consolidated income from operations fell by 11.7% to ₹2.26 lakh crore as compared to ₹2.56 lakh crore in the first quarter of FY23. Falling crude &amp; improving margins Brent crude oil prices have fallen 17% to average around $85 per barrel since October 2022, compared with an average price of $105/bbl for the six months ended 30 September 2022. The profitability of the oil marketing companies (OMCs) has increased as retail selling prices of gasoline and gasoil have remained unchanged during the period, says Moody’s. Indian refiners have been purchasing more of Russian crude oil, that’s trading at a discount to Brent crude, which has benefitted them. Before the conflict, Russian crude accounted for less than 2% of the total crude oil consumption for the Indian refiners, but this has since increased to around 15%-20%. Moody's expects this trend to continue over the next 12-18 months. What lies ahead The rating agency has affirmed its ratings to the credit issuances of all the PSU oil marketing companies — IOC, HPCL and BPCL. "The rating affirmation reflects our views that the operating performance of the state-owned refining and marketing companies will continue to improve as lower crude oil prices will reduce marketing losses and moderate working capital requirements," says Sweta Patodia, a Moody's Assistant VP and analyst. Patodia also says that they expect the government to compensate the oil marketing companies for their past losses. On February 1, the Indian government allocated $3.7 billion as capital support for the oil marketing sector.

IndianOil posts multifold growth in Q1, net profit at ₹14,735 crore beats estimates

Mumbai, Apr 7 () National oil companies are staring at inventory losses as they have to bring down refinery throughputs because of the plunging demand for fuels following the nationwide lockdown to contain the deadly coronavirus infection. India is the world's third-largest energy consumer but the Covid lockdown has shut businesses, suspended flights, stopped trains and brought almost the entire vehicular movement to a halt, impacting fuel demand. For the full the month of March, total retail volume has come down by 17 per cent, led by a 26 per cent dip in diesel demand and a 17 per cent fall in petrol and practically demand for aviation fuel is down 33 per cent, according to the national data shared by IOC on a year-on-year basis. The only fuel that saw a demand spike in the month was cooking gas that, too, after panic buying since the national lockdown. Overall, LPG demand rose 1.7 per cent in the month, according to the IOC data. There are 27.59 crore active LPG customers in the country. All the national companies have seen a massive spurt in demand for the cooking fuel as people resorted to panic buying, leading to an average 40 per cent rise in demand in the first week of the lockdown. While IOC, which controls more than 50 per cent of the market, did not share its sales data, both BPCL and HPCL have said their diesel and petrol sales have fallen by over 55 per cent. HPCL Chairman Mukesh Kumar Surana told that the refinery throughput has come down to around 70 per cent. "While the Vizag refinery is running at full capacity, the same at Mumbai is only around 80 per cent," he said. From the demand side, he said even though all the filling stations are open there is hardly any demand. While diesel demand is down 40 per cent as trucks are off roads, petrol demand has more than halved as people remain indoors because of the lockdown. Only emergency service vehicles are on the roads. There is practically any demand for ATF too, he said. R Ramachandran, the refinery director at BPCL has the same thing to narrate. While refineries are running at under 70 per cent, from the demand side the story is more disappointing. "Our diesel and petrol sales are down over 60 per cent and there is virtually no demand for ATF as only a few cargo flights are operational," he told . However, he expects diesel demand to improve as more trucks come on to roads to deliver essential goods and ecommerce deliveries join them as the lockdown remains in force. But the companies are fearing inventory losses due to the massive plunge in demand. Though the company has only minimal inventory level, Ramachandran said, "losses are sure for the month and April and going forward if the lockdown extends". However, the HPCL chairman sounded a bit more confident of managing inventory as he looks to export some fuels if the lockdown gets extended. Surana also said, "since HPCL being a net buyer of refined products, we are regulating our throughput so that we can avoid shutdowns" and the resultant inventory losses." While HPCL has an installed capacity for 15 million tonnes it produces around 18 million tonnes but sells around 28 million tonnes. BEN MRMR

Plunging fuel demand has OMCs worried on all fronts

New Delhi, May 11 () Standalone credit profiles of India's oil marketing companies are at greater risk of downward revision due to the coronavirus-induced drop in demand and refining margins, and their continued investments, Fitch Ratings said on Monday. However, the Issuer Default Ratings (IDRs) of Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), which are driven by sovereign linkages through the state's direct or indirect ownership, will remain stable. "We expect the net leverage of the three companies to weaken over the financial year ended March 2020 (FY20) and FY21 to levels where we would consider revising their SCPs (standalone credit profile) downwards, before improving to in line with their current SCPs from FY22. The weakened metrics leave minimal headroom for the SCPs of HPCL and BPCL and limited headroom for IOC's," it said. Fitch in a statement said the FY20 financial profiles of the three companies were likely to have been affected by large inventory losses due to the steep fall in crude oil prices in the last fortnight of March 2020 and by weakened demand during the period. There was also a short-term disruption in the receivables cycle. "All these will lead to a spike in FY20 gross debt, which pushed up their leverage metrics," it said. "We expect the three companies' leverage in FY21 to remain above levels appropriate for their SCPs as they face lower demand, weak refining margins, high capex, though below earlier estimates, and continuing dividend outflows." However, these factors will be partly offset by higher marketing margins until May 5, 2020 and lower working capital requirements given the low oil price assumptions. Fitch cut its FY2021 forecast for industry-wide gross refining margin (GRM) by around 35 per cent as it expects product cracks (or margins) to remain weak until global economic growth recovers materially from the coronavirus crisis. It expected FY2021 GRMs to remain at around FY2020 levels excluding inventory losses in March 2020, due to weak product spreads, which are expected to improve gradually from the second half of FY2021 as demand gradually recovers. The squeeze on GRMs should be partly offset by the reduced value of refining fuel losses due to low crude oil prices. "We estimate FY21 marketing and refining throughput volumes to fall by 10-15 per cent for the industry as the decline in demand for transportation fuels reduces capacity utilisation. This includes a severe drop in demand in 1QFY21 due to measures to contain the spread of the coronavirus, followed by a gradual recovery over the rest of the year," it said. However, the three oil marketing companies will benefit from lower working capital requirements during FY2021 due to low crude oil prices, as well as from our estimates of higher marketing margins on petrol and diesel until May 5, 2020. The companies did not cut product prices for over six weeks despite a fall in global crude oil prices and weakening product spreads, which should help them mitigate inventory losses from the steep fall in crude oil prices, Fitch felt. The increase in duties on petrol and diesel by the central government from May 6, 2020, should result in marketing margins reversing closer to normal levels. FY2021 should also see lower subsidy accrual on liquefied petroleum gas (LPG) sales given the fall in international LPG prices. The higher marketing margins should benefit HPCL more than BPCL and IOC given its higher share of earnings from marketing activities, it added. ANZ MRMR

Fitch Ratings says higher risks to Indian oil marketing firms' standalone profiles

New Delhi, Feb 28 () Fitch Ratings on Friday said HPCL-Mittal Energy Limited's credit metrics over 2019-20 and 2020-21 financial years would worsen by more than previously expected due to near-term weakness in refining margins and a faster pace of its petrochemical (petchem) capex. Earlier this week, Moody's Investors Service downgraded the corporate family rating of HMEL to Ba2 from Ba1 due to weak refining margins arising from a slump in fuel demand. In a statement, Fitch Ratings said while credit metrics will worsen in the current and the next financial year, "an accelerated earnings contribution from petchem will lead to faster deleveraging, resulting in net leverage (as defined by adjusted net debt/operating EBITDAR) coming down to below 5-times by FY23." The net leverage is still within Fitch's negative rating sensitivities for HMEL's Standalone Credit Profile (SCP) of 'bb-'. HMEL expects to start commercial operations of its petchem project by April 2021, a year ahead of its previous expectation. It spent R 3,800 crore during the first nine months of current fiscal and is likely to top Rs 6,000 crore for the financial year, compared with Fitch's previous expectations of Rs 3,500 crore. The company, which operates an 11.3 million tonnes a year oil refinery at Bhatinda in Punjab, is in the process of setting up a dual-feed petrochemical capacity of 1.2 million metrics tons per annum (mtpa). The project, which commenced in October 2017, was originally planned to be completed by March 2022. However, the company now intends to complete it by April 2021. The firm, which is an equal joint venture of Hindustan Petroleum Corp Ltd (HPCL) and steel czar Lakshmi N Mittal's Mittal Energy Investments, expects FY22 to be the first full year of petchem operations, with an EBITDA contribution of around USD 400-500 million. "However, we have assumed that it takes longer for the petchem project to stabilise and turn profitable, contributing around USD 115 million of EBITDA in FY22," it said. Fitch expects net leverage to peak at around 7x over FY20-FY21, before improving to below 5x in FY22 and below 4x in FY23. The leverage spike in FY21 is also affected by a one-off 60-day shutdown period for major maintenance of the refinery and integration of the petchem operations. "We had earlier expected leverage to range around 6x during FY20-FY21 and fall to around 5x by FY23," it said. HMEL reported EBITDA of Rs 2,600 crore during April-December 2019, with a gross refining margin (GRM) of USD 9.6 per barrel versus USD 10.3 in FY19. The reduction was in line with the industry due to strong new supply from China, volatility in crude prices leading to inventory losses, and falling heavy-fuel oil cracks in light of the tougher marine fuel regulations by the International Maritime Organization IMO from January 2020. Fitch said it has revised down its industry-wide GRM expectations, given the continuing surplus in the refining markets and also weaker-than-expected diesel spreads. The refining margins are also likely to be weighed down by the coronavirus situation in the near term but refining margins are expected to improve over the medium term, benefitting from strong diesel spreads driven by the IMO regulations, it said. "Sustained volatility in GRMs, lower earnings from the petchem project, or weaker demand for petroleum products if COVID-19 prevails for a prolonged period would be credit negative. "Any delays or challenges in the integration of HMEL's petchem project could also have an impact on deleveraging and add downward pressure to HMEL's SCP, which has little headroom at 'bb-'," Fitch added. Bhatinda refinery has high-complexity with a Nelson complexity index of 12.6, allowing for the processing of heavy crude oil and optimisation of product slate. ANZ ANZ MRMR

HMEL's credit metrics to worsen due to weak refining margins: Fitch Ratings

New Delhi, Oil sector public sector undertakings (PSUs) may have to bear a <keyword id="9705803" type="UNKNOWN" weightage="20" keywordseo="larger-share">larger share</keyword> of <keyword id="10488841" type="UNKNOWN" weightage="20" keywordseo="additional-dividend-payment">additional dividend payment</keyword> to the government this year with almost all companies falling behind on their capex plan for the current fiscal. As of November, the capex of PSU oil companies put together stands at ₹46,303 crore, less than 50% of the annual target of ₹98,522 crore. The government has asked companies to complete at least 75% of capex till the end of December quarter. But this looks highly unlikely now pushing the case for higher dividend payout. In meetings with PSUs, Finance Minister Nirmala Sitharaman had stressed on the need for PSUs to step up <keyword id="6355120" type="UNKNOWN" weightage="20" keywordseo="investment">investment</keyword> during the time of the pandemic to boost overall sentiments and kickstart investment climate in the country. She had specifically urged companies to complete at least 75% of capex target by December-end and more than 100% by March. "It is a double whammy for PSUs now. They have to cough up more either through investments or through payment of additional dividends. It should also be seen that the companies are finding it difficult to meet capex targets given financial and project implementation constraints. Covid has severely dented demand and slowed project implementation. Consequently, there is already a strain on their resources that would get heightened as additional dividend would have to be paid," said a top official of a PSU, asking not to be named. While almost all PSUs are facing delays and difficulties in stepping up the gas and increasing investments, the situation among companies in the oil and gas sector looks worse. Slow demand conditions in early part of the year resulted in slowing of several capex plans. Though the situation has improved from November onwards, still its a long way to go for normalcy to return in the sector. For the government, oil sector PSUs are also set to make big inventory gains due to firming up of crude prices, and hence they are being looked at for higher interim dividend or special dividend and a few may also be considered for share buyback depending on market conditions. Among the oil and gas PSUs, the worse performer in terms of capex spend is the country's largest oil and gas explorer ONGC and largest public sector refiner <keyword id="6356834" type="DOMAIN" weightage="20" keywordseo="indian-oil-corporation">Indian Oil Corporation</keyword>. According to oil ministry's <keyword id="819806" type="COMPANY" weightage="20" keywordseo="Petroleum-Planning-and-Analysis">Petroleum Planning and Analysis</keyword> Cell (PPAC), while ONGC had completed just ₹14,959 crore worth of capex upto November out of FY21 investment target of ₹32,502 crore, IOC's capex upto November is ₹12,104 crore against annual target of ₹26,233 crore. Similarly, HPCL has completed capex of ₹5,658 crore (upto November) against target of ₹11,500 crore; Gail India - ₹2,614 crore against annual target of ₹5,412 crore; Oil India - ₹2,136 crore vs ₹3,877 crore target; MRPL - ₹631 crore vs ₹1,150 crore, OVL - ₹3,765 crore vs ₹7,235 crore. Among the worst performer on capex is privatisation-bound <keyword id="155363" type="DOMAIN" weightage="20" keywordseo="Bharat-Petroleum-Corporation-Ltd">Bharat Petroleum Corporation Ltd</keyword> (BPCL) which has spent just ₹3,716 crore against target of ₹9,000 crore. Officials sources said that PSUs with stock prices higher than the book value and who have sufficient cash funds may also be asked to shell higher dividend in FY21. A call will be taken after the third quarter results of companies are declared late January or early February next year. With the central government being the largest shareholders in PSUs, higher dividend would largely help it to fill its coffers at a time when revenue is constrained due to a overall fall in economic activity during the pandemic while expenditure has risen sharply. Dividend from non-financial PSUs have been budgeted at ₹65,747 crore in FY21. Any increase in this will give a boost to non-tax revenue of the government and help its bridge the rising fiscal deficit that as per initial estimate is now pegged close to 8% of GDP. Finance Minister Nirmala Sitharaman and her predecessors, including the late Arun Jaitley and P. Chidambaram, had maintained the policy of advising non-financial state-owned companies that if they are not utilising their cash reserves for capex needs, they should give it to the Centre through dividends or share buybacks. As per the guidelines issued by disinvestment department DIPAM, every CPSE is required to pay a minimum annual dividend of 30% of PAT or 5% of the net-worth, whichever is higher. Apart from oil sector, several PSUs in power and mining space have completed just about 40% annual capex by November due to constrained business environment. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/top-stocks-to-watch-mrs-bectors-ril-bharti-airtel-vodafone-idea-ilfs-interglobe-aviation-future-group-deepak-nitrite-jubilant-foodworks-and-others/articleshow/79933826.cms">Top stocks to watch – Mrs Bectors, RIL, Bharti Airtel, Vodafone Idea, IL&amp;FS, InterGlobe Aviation, Future Group, Deepak Nitrite, Jubilant FoodWorks, and others</a> <a href="https://www.businessinsider.in/thelife/personalities/news/from-taking-on-yahoo-to-being-tamed-by-chinas-communist-party-its-been-a-roller-coaster-decade-for-jack-ma/slidelist/79935613.cms">From taking on Yahoo to being tamed by China’s Communist Party— it’s been a roller coaster decade for Jack Ma</a> <a href="https://www.businessinsider.in/careers/news/ey-is-looking-to-hire-9000-techies-in-2021-to-boost-its-digital-services/articleshow/79936576.cms">EY is looking to hire 9,000 techies in 2021 to boost its digital services</a>

Revenue constrained government may push oil PSUs short on FY21 capex to pay higher dividend

The cash-strapped government will gain close to Rs 1.6 lakh crore in additional revenues this fiscal from a record increase in excise duty on <keyword id="6367091" type="UNKNOWN" weightage="20" keywordseo="petrol">petrol</keyword> and <keyword id="6356109" type="UNKNOWN" weightage="20" keywordseo="diesel">diesel</keyword>, that will help make up for revenue it lost in a slowing economy and shutting down of businesses due to <keyword id="1754604" type="PERSON" weightage="20" keywordseo="coronavirus">coronavirus</keyword> lockdown. Late on Tuesday evening, the government hiked excise duty on petrol by Rs 10 per litre and that on diesel by Rs 13 a litre to mop up gains arising from international oil prices falling to a two-decade low. <div type="Article" hostid="261" msid="75563385" title="The excise duty on petrol rises by ₹10 and on diesel by ₹13 starting May 6" mstype="2" mssubtype="0"></div> This is the second hike in excise duty in less than two months and will help government garner over Rs 1.7 lakh crore in additional revenues annually at 2019-20 level of consumption, industry officials said. Considering the slump in consumption due to travel restrictions imposed by coronavirus lockdown, the gains in the remaining 11 months of the current fiscal year (April 2020 to March 2021) will be close to Rs 1.6 lakh crore, they said. Together with Rs 39,000 crore in annual revenues gained from the March 14 excise duty hike of Rs 3 per litre each on petrol and diesel, the government stands to gain as much as Rs 2 lakh crore. State-owned fuel retailing companies, <keyword id="59622" type="DOMAIN" weightage="20" keywordseo="Indian-Oil-Corp">Indian Oil Corp</keyword> (IOC), <keyword id="170673" type="COMPANY" weightage="20" keywordseo="Bharat-Petroleum-Corp-Ltd">Bharat Petroleum Corp Ltd</keyword> (BPCL) and <keyword id="6374014" type="COMPANY" weightage="20" keywordseo="hindustan-petroleum">Hindustan Petroleum</keyword> Corp Ltd (HPCL) had frozen petrol and diesel prices since March 16, as if anticipating the government move and will now set off gains they accrued from continuing drop in international oil prices against the excise duty hike. Officials said normally retail prices would have changed with any revision in taxes but like March 14, there is no change as the excise duty hike is being adjusted against the gains consumers should have got from Brent crude oil dipping to about USD 18 per barrel - the lowest since 1999. Commenting on the excise duty hike, Vikas Halan, Senior Vice President, Corporate Finance, Moody's Investors Service, said: "Government of India's increase in petrol and diesel taxes by USD 21/barrel and USD 27/ barrel respectively will result in government's tax collection increasing by about USD 21 billion, if the tax hike is maintained for full year. "This reinforces the importance of oil marketing companies to the government of India and validates the support incorporated in our credit assessment of these companies. The tax hike could result in higher working capital outflow for the oil marketing companies, which will partly offset the working capital savings from lower inventory costs." According to a notification issued by the Central Board of Indirect Taxes and Customs, special additional excise duty on petrol has been hiked by Rs 2 per litre and road cess has been hiked by Rs 8 a litre. In case of diesel, special additional excise duty has been hiked by Rs 5 per litre and road cess has been raised by Rs 8 a litre. With this, the total incidence of excise duty on petrol has risen to Rs 32.98 per litre and that on diesel to Rs 31.83. Petrol costs Rs 71.26 a litre in Delhi and a litre of diesel comes for Rs 69.39. Central excise duty makes up for 46 per cent of petrol and diesel price now. After considering local sales tax or VAT, the total tax incidence in the price is as high as 60 per cent. The excise tax on petrol was Rs 9.48 per litre when the Modi government took office in 2014 and that on diesel was Rs 3.56 a litre. The government had between November 2014 and January 2016 raised excise duty on petrol and diesel on nine occasions to take away gains arising from plummeting global oil prices. In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government's excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15. It cut excise duty by Rs 2 in October 2017 and by Rs 1.50 a year later. But it raised excise duty by Rs 2 per litre in July 2019. It again raised excise duty on March 14 by Rs 3 per litre. In preparation for the excise duty hike, Finance Minister Nirmala Sitharaman had at the fag end of the Budget session of Parliament took the authorisation to raise excise duty on petrol and diesel by Rs 8 per litre each in future. Sitharaman through an amendment to the Finance Bill, 2020 raised the limit up to which the government can raise special excise duty on petrol and diesel to Rs 18 per litre and Rs 12 per litre, respectively. The March 14 excise duty hike included Rs 2 a litre increase in special additional excise duty and Re 1 in road and infrastructure cess. This hike took the special additional excise duty to maximum permissible limit in law - Rs 10 in case of petrol and Rs 4 in case of diesel. This, through an amendment to the Eighth Schedule of the Finance Act, was increased to Rs 18 per litre in case of petrol and Rs 12 in case of diesel. Government sources said the Centre has taken this step of increasing duty to raise some revenue in view of a tight fiscal situation. This would help in generating the resources to meet expense of coronavirus fight as well as meet other spending needs such as on infrastructure. <div type="Article" hostid="261" msid="75569073" title="Fear and loathing in shopping malls⁠ — the owners call for help in the fight for survival from the coronavirus crash" mstype="2" mssubtype="0"></div>

India to gain ₹1.6 lakh crore this fiscal from record excise duty hike on petrol, diesel

(Eds: Adding analyst comments) New Delhi, May 6 () The Union government will gain close to Rs 1.6 lakh crore in additional revenues this fiscal from a record hike in excise duty on petrol and diesel that has pushed total incidence of taxation on auto fuels to 70 per cent of the price.Late on Tuesday evening, the government hiked excise duty on petrol by Rs 10 per litre and that on diesel by Rs 13 a litre to mop up gains arising from international oil prices falling to a two-decade low.Petrol price remained unchanged at Rs 71.26 a litre and diesel at Rs 69.39 as state-owned oil firms set off the excise duty hike against gains they accrued from fall in international oil rates.This is the second hike in excise duty in less than two months and will help the government garner over Rs 1.7 lakh crore in additional revenues annually at 2019-20 level of consumption, industry officials said.Considering the slump in consumption due to travel restrictions imposed by coronavirus lockdown, the gains in the remaining 11 months of the current fiscal year (April 2020 to March 2021) will be close to Rs 1.6 lakh crore, they said.Together with Rs 39,000 crore in annual revenues gained from the March 14 excise duty hike of Rs 3 per litre each on petrol and diesel, the government stands to gain as much as Rs 2 lakh crore.After the excise duty hike, taxes - both central excise and state VAT) - make up for 70 per cent of the price of petrol and diesel. A litre of petrol costs only Rs 18.28 per litre in Delhi but after including excise duty (Rs 32.98), dealer commission (Rs 3.56) and VAT (Rs 16.44) the price for consumer comes to Rs 71.26 a litre.Similarly, a litre of diesel costs only Rs 18.78 but after including excise duty (Rs 31.83), dealer commission (Rs 2.52) and VAT (Rs 16.26), it is priced at Rs 69.39 for consumers.State-owned fuel retailing companies, Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) had frozen petrol and diesel prices since March 16, anticipating the government move and will now set off gains they accrued from the continuing drop in international oil prices against the excise duty hike.ICICI Securities said the excise duty hike would mean a plunge in gross auto fuel marketing margin by 64 per cent (Rs 12.1 a litre) from Rs 19 on May 5 to Rs 6.9 on May 6.Emkay Global said oil marketing companies (OMC) have continued to pass on numerous VAT rate hikes implemented on petrol and diesel by states, but as gross margins touched a high of over Rs 18/20 on Tuesday, the excise hikes are most likely to be absorbed."The overall price freeze has now crossed 45 days. OMC officials have stated unrealistic global prices to be the reason behind this, but looking at the 60 per cent estimated drop in auto-fuel consumption, the 6-7x jump in marketing margin from normative rate implies more than making up for the volume hit," it said.Officials said normally retail prices would have changed with any revision in taxes but like March 14, there is no change as the excise duty hike is being adjusted against the gains consumers should have got from Brent crude oil dipping to about USD 18 per barrel - the lowest since 1999.Commenting on the excise duty hike, Vikas Halan, Senior Vice President, Corporate Finance, Moody's Investors Service, said: "Government of India's increase in petrol and diesel taxes by USD 21/barrel and USD 27/ barrel respectively will result in government's tax collection increasing by about USD 21 billion if the tax hike is maintained for the full year."This reinforces the importance of oil marketing companies to the government of India and validates the support incorporated in our credit assessment of these companies. The tax hike could result in higher working capital outflow for the oil marketing companies, which will partly offset the working capital savings from lower inventory costs."According to a notification issued by the Central Board of Indirect Taxes and Customs, special additional excise duty on petrol has been hiked by Rs 2 per litre and road cess has been hiked by Rs 8 a litre. In case of diesel, special additional excise duty has been hiked by Rs 5 per litre and road cess has been raised by Rs 8 a litre.With this, the total incidence of excise duty on petrol has risen to Rs 32.98 per litre and that on diesel to Rs 31.83.Petrol costs Rs 71.26 a litre in Delhi and a litre of diesel comes for Rs 69.39.Central excise duty makes up for 46 per cent of petrol and diesel price now. After considering local sales tax or VAT, the total tax incidence in the price is as high as 60 per cent.The excise tax on petrol was Rs 9.48 per litre when the Narendra Modi government took office in 2014 and that on diesel was Rs 3.56 a litre.The government had between November 2014 and January 2016 raised excise duty on petrol and diesel on nine occasions to take away gains arising from plummeting global oil prices.In all, duty on petrol was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government's excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.It cut excise duty by Rs 2 in October 2017 and by Rs 1.50 a year later. But, it raised excise duty by Rs 2 per litre in July 2019.It again raised excise duty on March 14 by Rs 3 per litre.Government sources said the Centre has taken this step of increasing duty to raise some revenue in view of a tight fiscal situation. This would help in generating the resources to meet the expense of coronavirus fight as well as meet other spending needs such as on infrastructure. ANZ BAL

Central govt to get Rs 1.6 lakh cr from record excise duty hike on petrol, diesel

<img class="gwt-Image" src="/photo/48168182.cms" /> The <keyword id="6354813" type="COMPANY" weightage="80" keywordseo="nifty">Nifty</keyword> is likely to remain under selling pressure on Wednesday as weak cues from across the globe strengthen bears' hands a day after the Index lost 1 percent in trade. Stock-specific action is seen related to earnings. 
 
Overnight close on Wall Street was negative with the main indices totalling losses of as much as 0.4% to 1%. European markets, too, ended in the red with losses of 0.3%-1.1%. Stocks in Asia are muted as well with major indices struggling in the red on Wednesday. Commodities remain on slippery slope: Gold, Copper, Silver, Crude Oil Futures, all of them trade in negative territory. 
 
Gold trades near 5-year lows and more losses are seen. Crude Oil is at 15-week lows ahead of US inventory data 
 
Meanwhile, the Nifty closed at 8,529 points on Tuesday, down 0.9 percent. Today's trading range has a support at 8,432 levels while the resistance is seen in 8,600-8,637 range. Stock specific action is expected related to earnings. The SGX Nifty Futures, trading in Singapore, point to an opening of below 8,500. 
 
The derivatives space has given equally bearish signals. Foreign investors emerged net sellers to the tune of 227 crore rupees in the cash market, their first sale in 7 sessions. Domestic funds chipped in with 146 crore rupees worth of purchases. Net buying was seen in Index Futures worth `1,256 crores; Net Sales worth 13 crores in Stock Futures; Net Sales amounting to 806 crore rupees in Index Options and net sales totalling 176 crores in Stock Options. 
 
Meanwhile, delivery based selling to the tune of `1,700 crore was seen on Sun Pharma while `1,100 crore rupees worth of Infosys stock was purchased on Tuesday. 
 
STOCKS TO WATCH: 
 
CITIGROUP ON HPCL, BPCL, IOCL: Raises price targets on all three oil marketing companies citing benign price environment for Crude Oil, their main raw material purchase. Price Target on HPCL raised to `1,106 from `749. Target on BPCL raised to `1,062 from `932 and on IOC to `506 from `407. 
 
LIC HOUSING FINANCE: BoFA ML raises price target to `590 vs `565. 
 
COAL INDIA: BoFA ML reinstates coverage with a Buy Rating and a Price Tgt of `534. 
 
INDIABULLS HOUSING FINANCE: BoFA ML raises price target to `800 from `750. 
 
AUROBINDO PHARMA: USFDA has found some quality issues related to Aurobindo's Unit 12 in Hyderabad, reports the ET. 
 
(Image credit: Indiatimes)

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