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Oil marketing companies may face financial risk: Fitch
Financial profiles of state-owned oil marketing companies such as Indian Oil Corp (IOC) may be at risk in the near to medium term due to pressure from the government to increase shareholder returns, Fitch Ratings said on Friday.
New Delhi: Financial profiles of state-owned oil marketing companies such as Indian Oil Corp (IOC) may be at risk in the near to medium term due to pressure from the government to increase shareholder returns, Fitch Ratings said on Friday.
Struggling to meet budget targets, the government had in the just concluded fiscal (2018-19) asked cash-rich PSUs to pay second interim dividend as well as undertake share buyback.
The share buybacks, wherein a company repurchases its shares and extinguishes them, helped the government get money while maintaining its control over them.
"The oil marketing companies (OMCs) IOC, Bharat Petroleum Corporation Ltd (BPCL) and upstream entity Oil India Ltd (OIL) declared high interim dividends of 67.5 per cent to 110 per cent of the face value of their shares, and undertook share buybacks in the financial year ended March 31, 2019 ," Fitch said in a statement.
These, it said, were likely to have been driven by pressure from the Indian government to increase shareholder returns to shore up the weak fiscal position and finance promises made ahead of elections in April and May 2019.
