As the June quarter earnings season kicks off today, one sector is likely to dominate the headlines—for the wrong reasons.
Losses at oil marketing companies (OMCs) are expected to drag India Inc’s aggregate earnings in Q1, offsetting the likely strong profit growth in the financials, telecom and metals sectors.
Motilal Oswal Financial Services (MOFSL) expects profit after tax (PAT) across its coverage universe to decline 3% YoY, marking the weakest quarterly earnings performance since September 2020. In contrast, Nifty companies are expected to fare better, with earnings projected to grow 10% YoY, reflecting differences in sector composition.
Excluding OMCs, earnings growth is projected at 14%, indicating that the drag on overall profits is largely coming from one sector.
Oil & Gas set for weakest quarter
The brokerage expects the oil & gas sector to report a 94% YoY decline in profits, the steepest among all sectors under its coverage. OMCs have been the biggest drag within the oil & gas space due to the West Asia conflict and are projected to post a combined loss of Rs 36,400 crore for the quarter gone by amid elevated crude prices.
At the company level, Japanese brokerage Nomura expects HPCL, BPCL & IOCL to report EBITDA losses of Rs 13,900 crore, Rs 15,800 crore and Rs 17,300 crore, respectively, in Q1, citing significant losses on the retail sale of petrol, diesel and LPG as the companies were unable to pass on higher crude prices burden to consumers. The brokerage added that stronger gross refining margins are likely to have partly offset the marketing losses during the quarter.
Beyond OMCs, cement companies are also expected to report a 13% decline in profits, while the auto, healthcare and media sectors are projected to post a 3% decline each.
