Moody's Affirms Stable Outlook for IOCL and BPCL Amid Strong Credit Metrics

Moody's Ratings maintained a stable outlook for Indian Oil Corporation (IOCL) and Bharat Petroleum Corporation (BPCL). The firms are expected to sustain strong credit metrics despite earnings moderation and high capital spending, according to Moody's Ratings Assistant Vice President Sweta Patodia.

Moody's Ratings on Thursday affirmed a stable outlook for state-owned oil giants, Indian Oil Corporation Ltd (IOCL) and Bharat Petroleum Corporation Limited (BPCL). The rating agency stated in two separate announcements that the decision underscores expectations of robust credit metrics for both companies over the next two to three years, despite anticipated moderation in earnings and significant capital expenditures.

According to Sweta Patodia, a Moody's Ratings Assistant Vice President and Analyst, "IOCL's solid balance sheet, coupled with its status as India's largest refining and marketing company, support a baa3 BCA (Baseline Credit Assessment)." Moodys forecast crude oil prices to stay around current levels in the coming months, maintaining healthy marketing margins even as they normalize from their high 2023 levels.

The stable outlook on IOCL's rating reflects a similar outlook on the Government of India, Moody's elaborated. IOCL stands as a leading downstream company in India, engaged in oil refining, marketing, and distribution of petroleum products, petrochemicals, and natural gas. With 11 refineries boasting a cumulative capacity of 1.6 million barrels per day, IOCL holds around 31 per cent of the country's refining capacity. The company also operates an extensive pipeline, retail network, petrochemical ventures, and a gas distribution business.

For BPCL, Moody's expects steady operating performance in light of ongoing growth in India's petroleum product consumption and a favorable refining and marketing margin environment. "The stable outlook reflects our view that BPCL's credit metrics will remain appropriately positioned despite the company's large-scale capital spending plans spanning the next five years," noted Patodia. BPCL is a major player in oil refining and retailing petroleum products, with three refineries located in Mumbai, Kochi, and Bina, amounting to a combined capacity of 709,000 barrels per day. As of June 30, 2024, BPCL held a 14 per cent share of the domestic refining capacity and was 52.98 per cent owned by the Indian government.

(With inputs from agencies.)