Oil companies repay Rs 40,000cr to banks

MUMBAI: State-owned oil marketing companies (OMCs) have put in as much as Rs 40,000 crore of liquidity back in the banking system by repaying their high cost debt as the price of crude oil softens in the international market.
Confirming the move, Indian Oil Corporation (IOC) chairman B Ashok told ToI, "At IOC alone, we have reduced our debt by over Rs 25,000 crore in the last one year to less than Rs 60,000 crore.With this our interest outgo has came down to Rs 1953 crore from over Rs 2800 crore a year earlier, thereby adding to our profitability."
Similarly, Bharat Petroleum Corporation (BPCL) has reduced its debt by over 31% to Rs 13,383 crore as on September 30, 2014 from Rs 20,000 crore, six months ago. BPCL's short term borrowing reduced significantly from Rs 8184 crores as on March 31, 2014 to Rs 999 as on September 30, 2014. This resulted in interest outgo for BPCL going down to Rs 129 crore from Rs 324 crore a year ago, adding to the profitability.
Hindustan Petroleum Corporation (HPCL) too has reduced its borrowings more than 26% to Rs 23,635 crore from Rs 32,000 crore six months back. HPCL's short term borrowings halved to Rs 7362 till September 30, 2014 from over Rs 16,315 crore as on March 31, 2014.
Investment advisor S P Tulsian believes inspite of diesel de-regulation and lower borrowing cost, the profitability of the OMCs will be impacted by inventory losses due to falling crude oil prices.
Indian Oil Corporation (IOC) had reported a loss of Rs 898 crore in the second quarter ended September as against a net profit of Rs 1,600 crore in the year ago period. This was mainly due to inventory loss of Rs 4,272 crore as compared to an inventory gain of Rs 4,635 crore in second quarter last fiscal, as global oil prices slumped from $111 per barrel to $95 per barrel.
This loss is likely to widen going forward as crude oil slid by as much as 30% in the third quarter alone leaving the OMCs to keep their fingers crossed to access the impact on their bottom-line from crucial collateral damage due to falling crude prices.