Oil scrips take a knock

Record crude oil prices and the likelihood of the subsidy burden on oil marketing companies being higher have pulled down the share prices of these companies on the Bombay Stock Exchange over the last quarter.

The price-to-earnings (PEs) ratio for these companies has also deteriorated at a time when the PE for the Sensex has gone up from about 21 (on July 2nd) to a peak of 26 (on Oct 15).

The performance of these companies is,however, in stark contrast to that of upstream oil companies such as Oil and Natural Gas Corporation (ONGC) and

Reliance Industries (RIL). While the latter has a petrochem play too, it has seen a hefty increase in PE from less than 20 on July 2 to about 28 on the last day of trading. ONGC's PE has increased to 14.69 from 11.96, while GAIL's has gone up to 12.73 from 10.52 on July 2.

"Oil marketing companies have been hit by surging crude oil prices. The appreciating rupee has definitely helped these three oil companies offset some of their losses. However, what is interesting to note is that even though the appreciating rupee has also adversely impacted RIL, ONGC and GAIL as they bill in dollar terms, their PEs and share prices have risen significantly," said a Mumbai-based analyst.

"However, what must be kept in mind is that RIL's margins from their petrochemicals business is huge. Also, they have other businesses. Their PEs are therefore not based entirely on the oil and gas business," the analyst added. The basket of crude oil that India refiners buy has averaged $77.22 per barrel in October so far. During the month it crossed the $80 mark for the first time and touched a record high of $81.35 ber barrel.

In September the average price of the basket was $74.83 per barrel.

Since July 1 this year the basket has averaged $ 76.02 per barrel compared with an average price of $66.52 per barrel in the April -June quarter.

The high crude oil prices have pushed up the retail losses of the three government-owned oil marketing companies to around Rs 220 crore per day, up from around Rs 180 crore in the first fortnight of September. Losses on diesel sales have also increased to Rs 6.20 per litre from Rs 5.70 per litre in the second fortnight of September.

That for petrol has increased to Rs 3.90 per litre from Rs 3.50 per litre. The share prices of the oil marketing companies have also reflected the adverse affect of the record-breaking crude oil prices.

Share prices of Hindustan Petroleum Corporation (HPCL), the country's second largestretailer of petroleum products, has taken the maximum hit since July 2 with a 14.57 per cent.

Indian Oil Corporation's (IOC) share price has fallen 6.31 per cent since July 2 to 425.30 on October 19 while that of Bharat Petroleum Corporation (BPCL) has dipped 4.89 per cent to 326.30.

The drop in share prices has eroded Rs 3,892 crore from the three companies' market capitalisation since the beginning of this quarter. Comparatively, ONGC's share price has outperformed the Sensex with a 26.65 per cent increase so far since July 1. The company's market cap has also increased by Rs 44,048.30 crore. GAIL's stock has also increased 26.77 per cent, with its market cap increasing by 27.11 per cent.

RIL has seen its share price increase by a whopping 46.97 per cent during the period. Its market cap has also increased by 51.48 per cent.