Oil marketing companies (OMCs) such as IOCL, BPCL, and HPCL are set to benefit after the government approved a ₹30,000 crore LPG subsidy, to be paid in tranches over the next 12 months. According to UBS, this payment equals 74% of FY25 dues, with 62% of the dues accumulated till end-June 2025 to be settled in twelve monthly instalments. The allocation works out to around ₹140 billion for IOCL, ₹80 billion for BPCL, and ₹80 billion for HPCL, based on their respective LPG sales volumes.
UBS noted that the subsidy amounts to 8%, 10%, and 16% of the June 2025 book value of IOCL, BPCL, and HPCL, respectively, and is equivalent to 7%, 6%, and 9% of their current market capitalisation.
Morgan Stanley said the government’s ₹300 billion (US$3.5 billion) allocation for cooking-gas-related under-recoveries should imply a 75% upside to FY25 earnings, which are already above mid-cycle levels. The payment is expected to reduce leverage for fuel retailers by 12% and underscores a consistent 14–15% ROCE across oil price cycles. The brokerage prefers HPCL and BPCL, noting that while cooking gas recoveries increase the risk of a fuel price cut, the impact of a ₹1–2/litre cut would be limited.
Disclaimer: The above views are those of the brokerages. Please consult a SEBI-registered investment advisor before making any investment decisions.
