The brokerage’s Energy Analyst Probal Sen said; “As far as upstream is concerned, we continue to like Oil India and as far as gas space is concerned, GAIL probably still offers value if the tariff order sort of comes through and is anywhere close to what the street is building in and in the city gas distribution (CGD) space, we continue to like Mahanagar Gas (MGL) and Indraprastha Gas (IGL) in that order.”
According to Sen, government initiatives to address investor concerns have been a positive step. This approach helps remove misconceptions around policy intervention and capital allocation.
From an operational perspective, Sen highlighted that a stable crude oil price is beneficial for the sector. This stability helps prevent sharp volatility in margins and preserves the companies’ pricing power on the retail front.
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Furthermore, Sen outlined that the financial health of OMCs is supported by the recent liquefied petroleum gas (LPG) compensation and resilient gross refining margins (GRMs), which are holding steady at approximately $4 to $4.50 per barrel. These factors contribute to his projection of a consolidated margin of about ₹6.5 per litre.
He believes this level is ‘fairly reasonable’ and sufficient to facilitate continued earnings growth, even as companies like Bharat Petroleum Corporation Ltd (BPCL) and Indian Oil Corporation Ltd (IOCL) undertake significant capital expenditure programmes.
While acknowledging the upcoming elections as a potential factor, Sen suggested that the impact on fuel pricing might be contained.
He pointed to recent history over the last few years where retail fuel prices remained largely unchanged even ahead of crucial state elections, leading to a belief that any adjustments would be within a ‘reasonable range’ and not cause a systemic shock.
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(Edited by : Unnikrishnan)
