Oil Marketing Companies Face Tough Q1FY25: Kotak’s Sumit Pokharna Warns of Weak Petrol, Diesel Pricing Power

Oil marketing companies (OMCs) are facing poor earnings growth in the first quarter of the current fiscal year (Q1FY25) and likely won’t be able to change petrol and diesel prices soon. Sumit Pokharna, VP-Research Analyst at Kotak Securities, says that state-owned OMCs are experiencing losses in Q1FY25, which has reduced their profit margins on fuel sales to Rs3 per litre from the estimated Rs3.5 per litre for FY2025.

“We believe OMCs are absorbing all the costs related to oil prices, product cracks, logistics, and currency fluctuations. We don’t expect them to have any pricing power over petrol, diesel, and liquified petroleum gas (LPG), which make up about 80-85% of sales volume in Q1FY25,” Pokharna told LiveMint.

This lack of pricing power is a major concern. India’s three main state-owned OMCs—Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL)—had a combined net profit of ₹81,336 crore in the last financial year up to the end of March (FY24).