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Oil and Gas
Applicability of MAT on SEZ could be a negative for Reliance | No change in indirect tax on petroleum products
is negative for IOC/HP/BP | FY11 govt. share of subsidies may be 53.5% cf. 60%, negative for IOC/BP/HP
Lower tax surcharge but MAT rate increased
A fall in surcharge rate from 7.5% to 5% would take the effective
marginal tax rate from 33.2% to 32.5%, implying a 1.2%
positive impact on the EPS of ONGC/OIL/IOC/BPCL/HPCL.
This decline in surcharge has been offset by an increase in basic
MAT rate from 18% to 18.5%, keeping effective MAT rate largely
unchanged at c.20%. This would imply no impact on Reliance
Cairn India’s profitability.
Applicability of MAT on SEZ may be negative on RIL
SEZ units have been brought under purview of MAT. Reliance’s
new refinery is classified as an SEZ unit and applicability of MAT
could lead to 3-5% decline in Reliance’s EPS. However, if
applicability of 80IB tax holiday is also allowed then we may have
no impact on profits. Reliance is also guiding for no change.
No change in customs or excise duty
Contrary to expectations, there was no change in indirect taxes
on key petroleum products. This should be disappointing for
downstream stocks (IOC/BPCL/HPCL) as a reduction in indirect
tax would have aided in reduction of under-recoveries.
FY11 govt. share of under-recoveries to be 53.5%
An oil subsidy provision of Rs200bn for FY12 is likely to be the
final reimbursement for FY11 but paid in FY12. It will take full
year FY11 government reimbursement to 53.5% (Rs410bn) as
compared to 60% that we currently assume. Given that upstream
sharing is unlikely to change ahead of ONGC’s FPO, this will be
very negative for FY11 EPS of IOC/BPCL/ HPCL.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oil and Gas
Applicability of MAT on SEZ could be a negative for Reliance | No change in indirect tax on petroleum products
is negative for IOC/HP/BP | FY11 govt. share of subsidies may be 53.5% cf. 60%, negative for IOC/BP/HP
Lower tax surcharge but MAT rate increased
A fall in surcharge rate from 7.5% to 5% would take the effective
marginal tax rate from 33.2% to 32.5%, implying a 1.2%
positive impact on the EPS of ONGC/OIL/IOC/BPCL/HPCL.
This decline in surcharge has been offset by an increase in basic
MAT rate from 18% to 18.5%, keeping effective MAT rate largely
unchanged at c.20%. This would imply no impact on Reliance
Cairn India’s profitability.
Applicability of MAT on SEZ may be negative on RIL
SEZ units have been brought under purview of MAT. Reliance’s
new refinery is classified as an SEZ unit and applicability of MAT
could lead to 3-5% decline in Reliance’s EPS. However, if
applicability of 80IB tax holiday is also allowed then we may have
no impact on profits. Reliance is also guiding for no change.
No change in customs or excise duty
Contrary to expectations, there was no change in indirect taxes
on key petroleum products. This should be disappointing for
downstream stocks (IOC/BPCL/HPCL) as a reduction in indirect
tax would have aided in reduction of under-recoveries.
FY11 govt. share of under-recoveries to be 53.5%
An oil subsidy provision of Rs200bn for FY12 is likely to be the
final reimbursement for FY11 but paid in FY12. It will take full
year FY11 government reimbursement to 53.5% (Rs410bn) as
compared to 60% that we currently assume. Given that upstream
sharing is unlikely to change ahead of ONGC’s FPO, this will be
very negative for FY11 EPS of IOC/BPCL/ HPCL.
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