Mukesh Ambani-owned stocks dip up to 58% from 2024 high

Shares of Mukesh Ambani-owned companies such as Alok Industries, HFCL, Just Dial, Network 18, Den Networks, and Hathway Cable have dropped by up to 58% from their 2024 highs. Reliance Industries, the flagship firm, has reached an 8-month high but remains 9% away from its lifetime peak of ₹1,609.

India's two major private-sector refiners, Reliance Industries and Nayara Energy, are shifting their focus towards the domestic fuel market due to squeezed global profit margins. This strategic move is capitalizing on India's growing fuel demand and offering discounts and expanded retail networks to compete effectively with state-owned refiners [1].

The decision to prioritize domestic sales comes amidst a slowdown in fuel demand growth in developed markets and China, the world's second-largest oil consumer, as the transition to electric vehicles gains traction [1]. The lower demand offshore, combined with supply competition from new refiners like Dangote in Nigeria and rising exports from China's underutilized processors, has compressed global refining margins, making the Indian market more attractive [1].

The International Energy Agency expects India to become the largest source of global oil demand growth out to 2030, in contrast with China, where fuel demand may have already peaked [1]. FGE analyst Dylan Sim predicts Indian gasoline consumption and diesel demand will grow around 4% and 2% per year, respectively, over the next decade [1].

Private refiners have a key advantage in India, allowing them to undercut state-owned refiners at the pump by running cheaper crudes through their plants. Reliance and Nayara are the country's biggest buyers of discounted Russian crude, available since 2022 [1]. While the private refiners do not publish their refining margins, analysts at Jefferies expect Reliance's margin to be around $2 a barrel stronger than the benchmark Singapore refining margin due to its blending of cheaper Russian and Canadian crudes [1].

Reliance sells fuels through Jio-BP, its retailing tie-up with UK major BP, which has 1,916 outlets in India. Its domestic sales volumes of diesel rose by 35% and gasoline by 24% in the quarter ended in March from a year ago, according to Reliance [1]. Jio-BP plans to invest about ₹10 billion annually to expand its local footprint in the coming years [1].

Nayara, whose biggest shareholder is Russia's Rosneft, in April reintroduced discounts of 2-3 rupees per litre on gasoline and 1 rupee per litre on diesel. Selling through more than 6,500 fuel stations, it aims to add 400 this year [1].

State players Indian Oil Corp, Hindustan Petroleum Corp, and Bharat Petroleum Corp, which operate more than 90% of India's roughly 97,000 filling stations, have not cut pump prices as they seek to recoup losses on sales of cooking gas at government-fixed below-market rates [1].

India is also expanding its highway network and auctioning large roadside plots for building fuel stations featuring a host of amenities for motorists, as state refiners rapidly build their networks and offer services like eateries, recreational areas, and gym facilities to compete and boost sales [1].

References:
[1] https://sg.finance.yahoo.com/news/private-refiners-tap-indias-drivers-061351156.html
[2] https://economictimes.indiatimes.com/industry/energy/oil-gas/refiners-reliance-and-nayara-tap-indias-drivers-as-export-markets-tighten/articleshow/121668151.cms