PSU oil firms’ debt reduces on fuel reforms & foreign currency loans

Reforms in the fuel sector have helped three oil majors such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) to significantly reduce their debt levels in the past three years

IOC’s has cut its debt by 37 % to Rs.497 billion in 2014-15 from Rs.783 billion in 2013-14. 

BPCL’s debt was down by 52 %to Rs.111 billion from Rs.235 billion

HPCL’s debt fell by 47 % to Rs.170 billion from Rs.324 billion. 

Three PSU oil majors have replaced their high cost debt with low cost foreign currency debt, which is based on floating LIBOR

 More over, fuel reforms helped in reducing working capital loan

Also, 45% decline in crude oil price from $110bbl to $50bbl, which led to lower requirement of working capital loan, according to Emkay Global Financial Services

Interest cost of IOC came down to 6.9 per cent (Rs.34 billion) in 2014-15 from 8.2 %(Rs.64 billion) in 2012-13. 

In the past two years, the company raised close to two-thirds of its total debt as foreign currency loans

Both BPCL and HPCL also saw their interest cost come down significantly due to due to higher share of foreign currency loans

For the next three years, IOC has a capex plan of Rs.467 billion, while HPCL has chalked out a capex of Rs.222 billion.

BPCL’s capex for the next three years is estimated at Rs.214 billion.IOC is implementing projects valued at over Rs.120 billion, which would add an additional 22 million tonnes in capacity and about 6,000 km in length to the existing pipeline network of 11,220 km