Oil Firms Suffer Rs 120,000 Crore Erosion In M-cap In A Week On Rollback Of Fuel Price Deregulation


Oil Firms Suffer Rs 120,000 Crore Erosion In M-cap In A Week On Rollback Of Fuel Price Deregulation

The share prices of India’s state-owned oil companies have declined by around 20 per cent on an average since the government announced a reduction in fuel prices on 4 October. Unsurprisingly, the aggregate market capitalisation of the six-largest listed state-run oil firms has fallen by Rs 120,000 crore ($16 billion) in the seven days since then.

The decline in share prices of Oil Marketing Companies (OMCs) — Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) — was driven directly by the government’s decision to ask them to sell petrol and diesel at subsidised prices for which they would not be reimbursed.

“The government’s decision not only weighs on OMCs’ earnings, but also represents a rollback of fuel price deregulation which has resulted in negative investor sentiment towards the sector in India. The share price decline is credit negative for the oil companies because of the high level of cross shareholdings in one another. The market values of their respective investments have declined, reducing their financial flexibility,” ratings agency Moody’s said in a statement. Read more

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