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While depreciating rupee has become a concern for companies importing goods and service from abroad and spending in the US currency, it seems to have brought good news for oil refining and producing companies Reliance Industries and producer Cairn India.
"Every rupee 1 change in the INR/USD rate assumption impacts RIL’s EPS by about 3%," said Rohit Ahuja, analyst with domestic brokerage ICICI Securities in a report released today.
RIL’s valuations are positively impacted by weakening rupee primarily from translation of gross refining margins (GRMs) and petrochemical cracks into rupee. Company's recent expansion in GRMS and petchem cracks add on to the positives.
"Cairn India gains considering its exposure to crude sales – crude in rupee terms has risen 4%," said the analyst.
The impact of increase in subsidies is to a major extent neutralised by rupee depreciation for upstream companies, especially for ONGC (for gas sales and international E&P).
Similarly, for Gail, there are upsides in petrochemicals and gas trading businesses, which overcome the negatives from rise in subsidies. Additional benefit for Gail is its declining share of subsidies among the upstream.
