Oil companies’ debt down due to loan replacement & fuel reforms

GN Bureau | September 9, 2015




Last three years have been good times for oil PSUs. Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have benefited due to significant reduction in their debt levels in the past three years.

IOC’s has cut its debt by 37 per cent to Rs.497 billion in 2014-15 from Rs.783 billion in 2013-14. BPCL’s debt was down by 52 per cent to Rs.111 billion from Rs.235 billion, while HPCL’s debt fell by 47 per cent to Rs.170 billion from Rs.324 billion.

Three PSU oil majors have replaced their high cost debt with low cost foreign currency debt, which is based on floating LIBOR. Moreover, fuel reforms helped in reducing working capital loan. Also, 45 per cent decline in crude oil price from $110bbl to $50bbl, which led to lower requirement of working capital loan.

Interest cost of IOC came down to 6.9 per cent (Rs.34 billion) in 2014-15 from 8.2 per cent (Rs.64 billion) in 2012-13.

In the past two years, the company raised close to two-thirds of its total debt as foreign currency loans. Both BPCL and HPCL also saw their interest cost come down significantly due to due to higher share of foreign currency loans.

For IOC, marketing performance has improved significantly to 77 per cent of EBIDTA in 2014-15 from from 33 per cent of EBDITA in 2012-13.
This is mainly because of increase in marketing margins of diesel and petrol, post deregulation.

With favourable debt/equity ratios, three companies can easily fund their capex for the next 2-3 years through a combination of internal accruals and by raising long term foreign currency loans at competitive rates, said the brokerage house.

For the next three years, IOC has a capex plan of Rs.467 billion, while HPCL has chalked out a capex of Rs.222 billion.

BPCL’s capex for the next three years is estimated at Rs.214 billion.IOC is implementing projects valued at over Rs.120 billion, which would add an additional 22 million tonnes in capacity and about 6,000 km in length to the existing pipeline network of 11,220 km.

Comments

 

Other News

AI: Code, Control, Conquer

India today stands at a critical juncture in the area of artificial intelligence. While the country is among the fastest adopters of AI in the world, it remains heavily reliant on technologies developed elsewhere. This paradox, experts warn, cannot persist if India seeks technological sovereignty.

RBI pauses to assess inflation risks, policy transmission

The Reserve Bank of India (RBI) has begun the new fiscal year with a calibrated pause, keeping the repo rate unchanged at 5.25 per cent in its April Monetary Policy Committee (MPC) meeting. The decision, taken unanimously, reflects a shift from aggressive policy action to cautious observation after a signi

New pathways for tourism growth

Traditionally, India’s tourism policy has been based on three main components: the number of visitors, building tourist attractions and providing facilities for tourists. Due to the increase in climate-related issues and environmental destruction that occurred over previous years, policymakers have b

Is the US a superpower anymore?

On April 8, hours after warning that “a whole civilisation will die tonight,” US president Donald Trump, exhibiting his unique style of retreating from high-voltage brinkmanship, announced that he agreed to a two-week ceasefire with Iran. The weekend talks in Islamabad have failed and the futur

Machines communicate, humans connect

There is a moment every event professional knows—the kind that arrives without warning, usually an hour before the curtain rises. Months of meticulous planning are in place. And then comes the call: “We’ll also need a projector. For the slides.”   No email

Why India is entering a ‘stagflation lite’ phase

India’s macroeconomic narrative is quietly shifting—from a rare “Goldilocks” equilibrium of stable growth and contained inflation to a more fragile phase where external shocks are beginning to dominate domestic policy outcomes. The numbers still look reassuring at first glance: GDP


Archives

Current Issue

Opinion

Facebook Twitter Google Plus Linkedin Subscribe Newsletter

Twitter