Shares of the country’s biggest fuel exporter Reliance Industries and state-owned oil explorer ONGC tumbled on Friday after the government slapped levies on exports of auto fuels and jet fuel, and also imposed a windfall tax on domestic crude oil production.
The RIL stock lost over 7% to close the session at Rs 2,408.95, after falling 8.82% in intra-day trades, recording an erosion of Rs 1.25 trillion in its market capitalisation. With this, RIL’s year-to-date gains are down to 1.7%, having outperformed the Sensex between January and Thursday.
While the ONGC stock crashed 13.4% to end the day at Rs 131.15, Vedanta shares lost 4% to close at Rs 213.95. The profits of both the companies will be hurt by the additional tax of Rs 23,250 per tonne on production of crude oil.
Stocks of other oil players also lost value, sending the BSE energy index down by nearly 4% to 7,635.10. The Sensex gave up 111.01 points or 0.21% to end at 52,907.93.
Analysts at Morgan Stanley wrote that assuming the full impact of the regulations on both diesel and gasoline, RIL’s GRM would be negatively impacted by $6-8/bbl realistically compared with last week’s margin of $24-26/bbl. “This would still be above our base case estimates on earnings. Every $1/bbl impacts RIL’s earnings by 2.5-3%,” they observed, adding that most other refiners sell most of their output in the home market, and consequently, the impact on their earnings would be limited. The brokerage believes the condition that half of the refined products must compulsorily be sold locally does not apply to SEZ & DTA refiners like RIL.
Analysts at Jefferies observed that if RIL’s SEZ refinery is exempted from the tax, the impact on GRMs will be just $1 per barrel. The brokerage has a price target of Rs 2,950 for the stock and expects a significant upgrade to RIL’s operating profit from refining.
Most other oil players, such as Oil India, MRPL, Chennai Petro and Hindustan Oil Exploration Company, yielded ground, losing anywhere between 3% and 15%. Shares of Oil India posted their record single-day fall of 15.1%. Shares of Chennai Petroleum slipped 5.2% to close the session at Rs 297.20 whereas Mangalore Refinery & Petrochemicals closed 10% down at Rs 81.55 on the BSE.