Ref No: 0901-004-NASA of 2009/Jan/06
Golden Era may arrive soon for Indian Oil Refiners
Ref: 0901-004-NASA - Country –India Sector - Oil Refiners, Oil Producers
Bloomberg reported today of Mr. Ahluvalia’s statement that Government of India is seriouslyconsidering “de-regulating fuel prices” very soon.
This event has extra ordinary implications and is very positive on State Owned and Privately ownedrefineries and also the Oil and Gas producers.
Who will benefit?
State owned refineries like my favorite BPCL, HPCL, IOC, MRPL, BongaigaonRefineries, ONGC, Reliance Industries Ltd. Reliance Petroleum Ltd. (RPL), Essar Oil Ltd. (EOL),GAIL, GSPL, Petronet, Indraprashtha Gas Ltd.The era of low share prices of all SOE (State Owned Enterprises) will be gone forever. Reliance that hasclosed down most of his Petrol Pump will begin to open them. Its gas find in Krishna-Godavari will becoming to production at very right time. May be RIL has partly influenced this decision.The profitability of SOE refiners will rise tremendously. May be their profit may rise anywhere from40% to 100% or even more. Their EPS too will rise very smartly. Their cash flow will increase, andtheir cash dividend may rise very smartly, because most of it will go Government of India.My dream of SOE refiners to multiply 5 to 10 times in less than 2 years is now a distinct possibility.Further, the SOE refiners have very small quantity of shares.The Metal industries, Fertilizers, and Power plants will suffer because of higher uncontrolled prices of their inputs. This is negative for REL, NTPC, RNRL, CESC, and host of power plants who use oil asmajor inputs. Their working capital requirements will rise by at least 30% due to higher fuel price andcarried inventory. Cairn energy which will become major producer of oil from June 2009 will begin torise smartly. After ONGC, they will become the second largest oil producer.The Cement plants too may suffer - the cost of transportation will rise. Train fare may rise; shippingcompanies too may suffer too. There will be weak protest from public utility vehicles like Autorickshaw whose recent pleasure will be short lived.