It is time for a turnaround in the stock prices of public sector oil marketing companies that have surged by up to 90 per cent over the last eight months, leaving private sector rivals behind.
The public sector oil marketing companies (OMCs) have seen shares tumble by as much as 45 per cent in the four-month period between May and August 2013 following a sharp depreciation in rupee and reigning high crude oil prices.
While the shares of BPCL and HPCL have jumped by 93 per cent each in the calendar year 2014, the shares of Indian Oil Corporation are up by 69 per cent.
The rupee is currently trading at around 60 to the dollar as compared to a level of 68.85 (its lowest ever) that it hit in August 2013. The price of crude oil (Indian basket) that stood at over $108 per barrel in August 2013, is currently priced at $100 per barrel and the prices have softened over the last couple of months from around $110 per barrel, thereby reducing the burden of the OMCs.
As per the government’s estimate, the under-recovery for the OMCs for the financial year 2014-15 are expected to remain at around Rs 91,665 crore down by almost a third of that witnessed in the financial year 2013-14 when it stood at Rs 1,39,869 crore.
A report released by CRISIL last week says that prices of crude oil, thermal coal and liquefied natural gas (LNG) will be under pressure in the long term because of surge in supplies, move to alternate fuel, and slowing demand.
“Between fiscals 2009 and 2014, India’s energy import bill surged at an average 14 per cent annually to $161 billion. We now expect this to rise only 1.6 per cent annually to $175 billion by 2019 because prices of the three commodities are forecast to decline,” said the CRISIL report. It projects Brent crude to decline to $90-$100 per barrel by 2018 from $109 in 2013.
The rally has also spread to public sector oil and gas explorers. ONGC witnessed a 48 per cent jump in its share prices in the calendar 2014, while Oil India too saw its shares rise by 23 per cent.
Private sector players Reliance Industries and Cairn India, however, have lagged significantly. While RIL has gained 11.5 per cent in the same period Cairn India has remained flat.
Among the private sector oil players Essar Oil comes on top as its share prices have jumped by 122 per cent in the same period by the rise is on account of the company’s plans to buy-back the shares of the company and delist it.
The delisting plans first came out in public in May since when the shares of Essar Oil have been on a rise, later in June the company announced that the board has approved its delisting plans.