The rupee is currently trading above the mark of 88 against the US Dollar, on Wednesday, September, 3, having made a record low 88.34 against the greenback on Monday. Here is how the weakness in the currency impacts oil and gas companies like ONGC, Oil India, HPCL and their peers.
1 / 6The rupee is currently trading above the mark of 88 against the US Dollar, on Wednesday, September, 3, having made a record low 88.34 against the greenback on Monday. While a depreciating rupee is generally positive for IT companies as it aids in margin expansion, how are some of the other companies impacted due to this weakness? Here is a look at some names:
2 / 6ONGC and Oil India | For the state-run upstream oil explorers, every ₹1 depreciation against the US Dollar boosts their standalone Earnings Per Share (EPS) by 1% to 2%, according to brokerage firm ICICI Securities. Oil India may even see more upside courtesy of the Gross Refining Margin (GRM) gain of the Numaligarh Refinery.
3 / 6Petronet LNG | For the gas company, the regas margins are US Dollar-linked and ICICI Securities believes that every depreciation by ₹1 against the US Dollar, will benefit the company’s EPS by 1% to 3%. Regasification is the process of heating liquified LNG back to its original gaseous state for it to be transported through pipelines and used as fuel.
4 / 6Reliance Industries | A depreciating rupee increases the company’s input costs, in the form of crude, LNG and Ethane. This, however, is offset by stronger realisations in refining, petrochemicals and the upstream segment. The net impact to RIL’s EPS is between a negative 1% to 1.3% for every ₹1 / USD depreciation, ICICI Securities said.
5 / 6HPCL, BPCL and Indian Oil | India’s oil marketing companies will see refining gains as a result of the weak currency, and that 1% boost to their EPS, will offset by compression in their refining margins. ICICI Securities estimates the net impact to their EPS to be nearly 11% for every ₹1 weakening against the USD.
6 / 6City Gas Distributors | Weakness in the currency results in a rise in LNG costs for companies like Indraprastha Gas (IGL), Mahanagar Gas (MGL) and their peers. There is also a limited pass-through of the excess costs. ICICI Securities expects the impact on these companies’ EPS to range from a negative 4% to a negative 11% for every ₹1 / USD depreciation.
