The Government’s decision to increase petrol and diesel prices and the refusal of the Petroleum Marketing Companies (PMCs) to increase retail prices could lead to a pressure on their marketing margin of around 64%. Analysts assume that the gross margin for marketing both fuels is still around Rs.7 per litre.
This is due to the fact that the government did not pass on to consumers the benefits of the fall in world oil prices – at one point the gross margin on the market was Rs.19. The reduction in the marketing margin came at a time when this was the only saving for the JI. The profit margin in the manufacturing sector remained low due to lower demand and lower retail volumes at the time of localisation.
It is not surprising that analysts have lowered MSG’s profit forecast for the financial year 2020-21 (FY 21) from 10% to 27%. Hindustan Petroleum Corporation, Bharat Petroleum Corporation and Indian Oil Corporation corrected Wednesday to 5.68% on oil platforms.
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Tax increases could lead to an increase in working capital outflow for MOC, which would partially offset working capital savings from lower inventory costs, said Vikas Halan, Senior Vice President Corporate Finance at Moody’s Investors Service.
This is the second time since March that the government has increased excise duties and failed to provide benefits to consumers when oil prices were low.
The ICICI Securities report shows that after the current jump the net marketing margin will decrease to Rs 2.3-4.4 per litre, suggesting a volume decrease of 32-62%. We estimate the gross margin from motor fuel marketing in the first quarter at Rs 9.9 per litre and the net margin at Rs 5.4-7.4 per litre, they said. Net profitability is obtained after excluding certain other costs.
ICICI Securities’ analysts were no longer convinced that the net marketing margin would be lower in the 21st century. During the financial year the price was Rs 2.5 to Rs 3 per litre. In fact, they reduced the target prices for MSG from 16 % to 34 %.
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Questions by e-mail to representatives of IndianOil and HPCL remained unanswered.
As far as the marginality of the transformation is concerned, forecasts are already low. This represents an increase of $1.2 per barrel in the March quarter compared to $3.2 per barrel in the fourth quarter19 and $1.6 per barrel in the third quarter20 . The recycling margin continued to decline in June. The data shows that the April benchmark has a negative average value of $1 and that May may also be affected by a volatile oil price scenario.
The impact on volume also persisted. Experts believe that in the context of falling oil prices and given the government’s fiscal problems, it would be preferable to increase excise duties, but only when demand picks up. As long as volumes remain low, the impact on OMS’ net profit will be negative, according to Emkay Global analysts, who say the forecast depends on how quickly the blockage is lifted.