India is one of the largest importers of crude oil, relying heavily on foreign sources to meet its energy demands. As the world’s third-largest consumer of oil, India’s dependence on crude oil is pivotal for fueling its economic growth. Major companies like HPCL, BPCL, and Indian Oil play key roles in the distribution and refining of oil products across the country. Despite global pushes for renewable energy, oil continues to be an essential source of energy due to its widespread use in transportation, industry, and power generation. The future of India’s oil industry appears poised for growth, with increasing demand driven by urbanization and industrialization, alongside efforts to improve energy efficiency and invest in cleaner technologies.
Share Price
The shares of HPCL are trading 6.6% lower at ₹326.9 from its previous close of Rs. 344.85, those of BPCL are trading 3.36% lower at ₹247 down from their previous close of Rs. 255.65, while those of Indian Oil are down 3.31% at ₹121.3.
Impact of Budget 2025 on Oil Marketing Companies (OMCs)
The Budget 2025 has created significant concern for India’s Oil Marketing Companies (OMCs), such as BPCL, Indian Oil, and HPCL, as it made no provision to compensate for the under-recoveries faced by these companies. As of the first nine months of 2025, the under-recoveries amounted to nearly ₹30,000 crore. This lack of support has resulted in selling pressure on their stocks, with analysts revising their price targets downward, reflecting growing uncertainty in the sector.
Jefferies’ Revised Price Targets
Jefferies has cut its price targets for major OMCs in light of the budgetary changes. BPCL’s target was revised to ₹330 from ₹370, while Indian Oil’s target dropped from ₹170 to ₹150. For HPCL, Jefferies has downgraded its “buy” rating to “underperform,” slashing the target from ₹295 to ₹270. These reductions signaled the market’s reduced optimism regarding the sector’s profitability moving forward.
Increased Subsidy Burden
The budget’s allocation for the LPG subsidy has placed an additional burden on the OMCs, as they are now required to bear nearly 69% of the under-recoveries on regulated products in FY 2025. This marks the first such occurrence in nearly nine years, restricting the marketing profitability of these companies. Although they benefit from higher margins on auto fuels, these gains are being offset by the losses incurred on LPG sales, which has led to a dampened outlook for the sector.
Reason for Rising Crude Prices
WTI crude oil futures rose to $73.8 per barrel following U.S. President Donald Trump’s announcement of tariffs on goods from Canada, Mexico, and China. The 25% tariff on Canadian and Mexican goods and 10% on Chinese imports raised concerns about potential supply
disruptions. Canadian oil and Mexican energy imports specifically face higher tariffs, threatening increased costs for consumers. In response, Canada and Mexico are preparing similar tariffs, and China plans to file a lawsuit at the World Trade Organization. However, the broader trade conflict could eventually dampen global economic growth and reduce energy demand, putting downward pressure on crude prices.
Profitability Risks Amid Rising Crude Prices
Further complicating the situation, Jefferies has highlighted that if crude oil prices rise beyond $85 per barrel, the auto fuel margins of OMCs could narrow, adding another layer of uncertainty to their future profitability.
While the brokerage has kept its earnings estimates unchanged, it has reduced the price-to-book multiples for these companies by 10% to account for the capped earnings and increased risks associated with crude price volatility.
Written By: Dipangshu Kundu
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