Petrol price hiked by `3.1/litre ::Angel Broking,

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Petrol price hiked by `3.1/litre
Oil marketing companies (OMCs) have hiked petrol prices by approximately `3.1/litre as
firm crude oil prices coupled with depreciating rupee were resulting in higher underrecoveries
(revenue losses) on sale of petrol. As per Indian Oil Corporation, OMCs were
losing `3.1/litre (including taxes) after considering the impact of the recent rupee
depreciation (4.2% during September 2, 2011, to September 16, 2011) against the US
dollar. A 5.0% depreciation in the rupee results in an increase in under-recoveries by
approximately `9,000cr annually. Despite the decline in crude oil prices from US$127/bbl
in April 2011 to US$115/bbl currently, OMCs have reportedly lost `2,450cr during
April-August 2011 on account of selling petrol at lower prices. Factoring in the recent
rupee depreciation, the hike in petrol prices is expected to have an insignificant impact on
overall under-recoveries. OMCs continue to lose `260cr per day on account of selling
diesel, domestic LPG and kerosene at subsidised prices at current prices. Hence, we
continue to maintain our under-recoveries estimates of `100,450cr for FY2012, primarily
on account of selling diesel, LPG cylinder and kerosene at subsidised prices. We maintain
our Buy ratings on ONGC and GAIL with target prices of `326 and `508, respectively.