BPCL, IOC shares slide up to 7% on Budget disappointment, oil price rise

Shares of state-owned oil marketing companies (OMCs) are under pressure, falling by up to 7 per cent on the BSE in Monday’s intra-day trade as analysts expect OMCs may continue to struggle in the financial year 2025-26 (FY26) as the 2025-2026 budget did not provide the anticipated stimulus.

Shares of Bharat Petroleum Corporation (BPCL) (down 5 per cent at Rs 242.30) and Indian Oil Corporation (IOC) (down 3 per cent at Rs 120.10) have hit their respective 52-week lows in intra-day trade. Shares of Hindustan Petroleum Corporation (HPCL) slipped 7 per cent to Rs 320.15 on the back of heavy volumes. In comparison, the BSE Sensex was down 0.7 per cent at 76,963 at 10:35 AM.

In the past two trading sessions, the stock price of these three OMCs have declined in the range of 7 per cent and 10 per cent.

For FY25, the government has revised the liquefied petroleum gas (LPG) loss subsidy upward to Rs 14,700 crore as compared to the Rs 11,925 crore announced in the previous budget. However, in spite of the upward revision, OMCs are likely to take a hit in profitability as under recovery stood in excess of Rs 30,000 crores for 9MFY25. To add to the pain, the FY26 budget has allocated Rs 12,100 crore for LPG subsidiaries, far lower than the anticipated value. This shall have a significant negative impact on the profitability of OMCs, according to ICICI Securities.

Elsewhere, oil prices jumped on Monday after US President Donald Trump imposed tariffs on Canada, Mexico and China, raising fears of crude supply disruption from the two biggest suppliers to the US. US West Texas Intermediate crude futures were at $73.89 a barrel, up $1.36, or 1.9 per cent, by 10:13 AM, after hitting its highest since Jan. 24 at $75.18 a barrel earlier in the session. Brent crude futures rose 67 cents, or 0.9 per cent, to $76.34 a barrel, after touching a high of $77.34.

LPG is a controlled item with its retail pricing determined by the government. In terms of accounting, LPG under-recoveries are charged to the P&L (profit and loss) heading, and over-recoveries are parked in a buffer account.

Meanwhile, OMCs stock prices corrected in the past three months and underperformed the benchmark index, due to LPG under-recoveries through 9MFY25, a weakening rupee and restrictions on discounted Russian crude import.

However, analysts at Elara Securities India reiterate that integrated margin (EBITDA per unit of refining and marketing volume) for IOCL may be elevated, given that crude price is above $80/bbl. This was validated in Q3 when strong retail fuel margin offset weak GRM and inventory losses. The brokerage firm reiterated 'Buy' as it expects IOCL and other OMCs to be allowed to earn elevated integrated margin to finance a massive capex of around Rs 6 trillion in the next five years (energy transition capex comprises ~30 per cent).