State-owned oil marketing companies (OMCs) including Indian Oil, BPCL, HPCL may see significant erosion in the earnings during the January-March quarter of FY20 even though low crude and product prices jacked up their margins on the sale of petrol and diesel.

According to a research report by ICICI Direct, the unusually high gross refining margins reported by OMCs have already seen a fall in the Q4 period and coupled with inventory losses that the companies would report during the period, would lead to a further drop in GRMs and consequently impact their revenues.

Companies make inventory losses in a falling market as the cost of the inventory in the form of crude and products is higher that the prevailing prices. The projection is that BPCL may report a net loss of Rs 556.2 crore in Q4, while Indian Oil may report significantly higher losses at Rs 2376.3 crore. ICICI Direct has projected loss to the tune of Rs 628.4 crore for HPCL in January-March quarter of FY20. “For Indian refiners, spreads of gas oil, gasoline and jet fuel are more important and have declined in the current quarter. The spread for gas oil declined by $1.9/bbl (per barrel) from $12.8/bbl to $10.9/bbl, which will negatively impact GRMs QoQ (quarter on quarter),” the report said.