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OMC's Strong Balance Sheet Due to Reduced Interest Payment, may Drive the Growth in Downstream Segment

News

Stars have aligned for India’s state-run fuel marketers, as a combination of weak crude oil prices, end of diesel subsidies and prompt government compensation for subsidized fuels has reduced their reliance on bank loans and cut interest expenses, putting more money in their hands and setting the stage for profit growth and expansion.

Source:  ET

SNP Insights

With almost 48% decline in crude oil prices than last fiscal & hence decrease in cost of purchase of crude oil & rising in prompt subsidy payment by new government, working capital expenditure of OMC is improving. Considerably less interest rate expenditure has strengthened balance sheet of the Oil Marketers leaving the scope for more investment & expansion plans. This may bring in positive sentiments to down stream segment, hence private investment in the sector might grow over the time.

Source: SNP Infra Research