IOC, HPCL, BPCL Stocks Plummet Up to 7% Amid Surge in Crude Oil Prices to $114

Indian Oil Marketing Companies (OMCs) Shares Plummet Amid Rising Crude Oil Prices

Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited (HPCL), and Bharat Petroleum Corporation Limited (BPCL) shares declined significantly on March 19, with HPCL experiencing the largest drop of 6.7% to ₹325.70. BPCL and IOC declined by 5.13% and 3.70%, respectively, as crude oil prices surged over 3% to top $114 per barrel.

The ongoing conflict in the Middle East, involving attacks on energy facilities, has exacerbated concerns around the impact of rising crude oil prices on OMCs' margins and bottomline. Analysts estimate that every $1/bbl rise in oil price above $70/bbl hits OMCs' auto-fuel Gross Margin by ₹0.55/ltr and consolidated EBITDA by 7-9%.

Kotak Institutional Equities (KIE) has raised its FY2027 oil price assumption to $85/barrel and FY2028 to $75/barrel from $65/barrel and $75/barrel earlier, respectively. The brokerage has reduced the FY2027E EBITDA by 45-47% for BPCL and HPCL and 28% for IOC. It has also slashed the FY2028E EBITDA by 3-8%.

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With no retail pricing freedom, OMCs will have to absorb higher crude and freight/insurance costs. The negative public sentiment amid LPG shortages makes large petrol/diesel price hikes very difficult. KIE has maintained a 'SELL' rating on IOC, BPCL, and HPCL, while revising target prices lower to ₹100, ₹240, and ₹235, respectively.