Israel-Hamas conflict: Rising energy costs likely to weigh on India Inc

An Adani Ports & SEZ statement said the company is closely monitoring the situation at its port, which is situated in the North - far away from the conflict zone

India Inc is bracing for a stormy time ahead as rising energy costs are expected to increase the expenses for all companies and stoke inflation after the Hamas attack on Israel sent jitters through worldwide markets, including oil prices, on Monday.

Barring a few companies like Adani Ports, which acquired Haifa Ports in January this year for $1.2 billion, and Sun Pharmaceuticals, which owns a stake in Taro Pharmaceuticals Industries, not many Indian companies have direct exposure to Israel.

An Adani Ports & SEZ (APSEZ) statement said the company was closely monitoring the situation at its port, which is situated in the North, far away from the conflict zone. The contribution of Haifa Port to the APSEZ’s total cargo volume is relatively small at 3 per cent.

“For this financial year, we have guided for Haifa cargo volumes in the range of 10-12 million tonnes (mt) and APSEZ’s total cargo volume guidance of 370-390 mt. In the initial six months, the APSEZ’s total cargo volume was 203 mt, of which the Haifa share was 6 mt. We remain confident in the APSEZ’s business performance,” the spokesperson said. APSEZ stock closed 4.8 per cent down, while the BSE Sensex was down 0.73 per cent.

“We have taken measures to ensure the safety of our employees, and all of them are safe. We remain fully alert and prepared with a business continuity plan that will enable us to respond effectively to any eventuality,” the spokesperson said.

Sun Pharmaceuticals did not comment, but the Israel-based company had reported sales of $573 million in the financial year ended March 2023 and a profit of $25.4 million. While some Indian pharmaceutical companies export their products to Israel, analysts said the volume was negligible. Officials of top IT firms said Indian IT firms do not have any exposure to Israel.

Interestingly, Indian oil and gas production companies like ONGC and Reliance Industries would significantly benefit from the sharp spike in crude oil prices. Analysts said companies involved in the oil production and exploration would benefit from the 5 per cent higher crude oil prices, while industries that rely heavily on energy consumption may face challenges. ONGC stock was flat at Rs 181.8 a share, while Oil India shares were up 5.2 per cent.

However, higher oil prices would reduce the profitability of oil- marketing companies like HPCL, BPCL, and Indian Oil Corporation, warned analysts. Despite higher crude oil prices, these companies will be unable to pass on the rising costs to retail customers due to upcoming elections, rating firm Moody's warned on Saturday. Rising oil prices are bad news for airline companies, as aircraft turbine fuel constitutes a significant portion of their costs.