Fuel price cut may dent EBITDA of IOCL, HPCL, BPCL by Rs 65 bn: Moody's

The recent cut in petrol and diesel prices by Rs 2.50 by the Centre is estimated to reduce the combined EBITDA margins of IOCL, HPCL and BPCL by Rs 65 billion during current fiscal, rating agency Moody's said Monday.

It also said on October 4, the government reduced petrol and diesel retail selling prices by Rs 2.50 per litre, through the lowering of excise duties by Rs 1.50 per litre and asking the country's oil marketing companies (OMCs) to absorb the remaining Rs 1 per litre ($2.1 per barrel) price cut.

"We estimate that the government's decision will reduce the combined EBITDA (earnings before interest, tax, depreciation and amortisation) of the three OMCs by INR 65 billion (Rs 6500 crore) in fiscal 2019, which ends in March 2019, which is around 9 per cent of their total EBITDA of INR 692 billion (Rs 69200 crore in fiscal 2018).

Despite the negative earnings effect of the government's decision, we continue to expect the three OMCs to report higher EBITDA in fiscal 2019 versus fiscal 2018, given higher sales volume, stable refining margins and the depreciating Indian rupee," the report said.