Co May Miss Profit Target For The September Quarter If Subsidy Burden Shoots Up
SHARES of Gail India, which is India’s largest natural gas transporter, dipped over 4.2% on Friday to Rs 362.85 on subsidy concerns. Despite underrecoveries of oil companies in the September 2009 quarter falling to one-tenth compared with the year-ago period, Gail’s subsidy burden has gone up.
“Our subsidy burden for the September 2009 quarter is above Rs 450 crore,” mentioned a highranking official of the stateowned company on condition of anonymity. Gail had contributed Rs 400.8 crore as subsidy in the September 2008 quarter, as part of the government’s subsidysharing mechanism.
However, Sandeep Randary, research analyst with BRICS Securities mentioned: “This is not a fair comparison. The company had revised its September 2008 quarter subsidy afterwards.” In the December 2008 quarter results, Gail had written off additional Rs 258 crore towards short provision of subsidy for the September 2008 quarter. Still, the subsidy for the September quarter is significantly higher than estimates put out by analysts.
“Based on our subsidy estimate of Rs 250 crore, our profit target for Gail was Rs 680 crore for the September 2009 quarter. If the subsidy burden turns out to be higher, the profit will go down accordingly,” said Vinay Nair, a research analyst with Khandwala Securities. The company is set to publish its quarterly results on October 28. A poll of seven brokerage estimates had pegged Gail’s profit 29% down y-o-y at Rs 722 crore for September 2009 quarter.
In the September 2008 quarter, Indian petroleum marketers, Indian Oil, BPCL and HPCL, which market auto fuels, kerosene and LPG at prices below cost, had under-recoveries of Rs 35,238 crore, out of which Rs 14,679 crore was reimbursed by upstream companies including ONGC, Oil India and Gail, while the remaining Rs 20,559 crore was paid through oil bonds.
Thanks to a policy turnaround from a year ago, the government now wants oil producers, ONGC and OIL, to share under-recoveries only on auto fuels, while Gail has to compensate for the losses on LPG. This arrangement has helped the oil producers to substantially trim their subsidy burden in the September 2009 quarter. ONGC, which bears the lion’s share in sharing subsidies, is expected to have cut its burden nearly 80% to around Rs 2,600 crore. All the oil companies will be publishing their September 2009 quarterly numbers between October 28 and October 30.
SHARES of Gail India, which is India’s largest natural gas transporter, dipped over 4.2% on Friday to Rs 362.85 on subsidy concerns. Despite underrecoveries of oil companies in the September 2009 quarter falling to one-tenth compared with the year-ago period, Gail’s subsidy burden has gone up.
“Our subsidy burden for the September 2009 quarter is above Rs 450 crore,” mentioned a highranking official of the stateowned company on condition of anonymity. Gail had contributed Rs 400.8 crore as subsidy in the September 2008 quarter, as part of the government’s subsidysharing mechanism.
However, Sandeep Randary, research analyst with BRICS Securities mentioned: “This is not a fair comparison. The company had revised its September 2008 quarter subsidy afterwards.” In the December 2008 quarter results, Gail had written off additional Rs 258 crore towards short provision of subsidy for the September 2008 quarter. Still, the subsidy for the September quarter is significantly higher than estimates put out by analysts.
“Based on our subsidy estimate of Rs 250 crore, our profit target for Gail was Rs 680 crore for the September 2009 quarter. If the subsidy burden turns out to be higher, the profit will go down accordingly,” said Vinay Nair, a research analyst with Khandwala Securities. The company is set to publish its quarterly results on October 28. A poll of seven brokerage estimates had pegged Gail’s profit 29% down y-o-y at Rs 722 crore for September 2009 quarter.
In the September 2008 quarter, Indian petroleum marketers, Indian Oil, BPCL and HPCL, which market auto fuels, kerosene and LPG at prices below cost, had under-recoveries of Rs 35,238 crore, out of which Rs 14,679 crore was reimbursed by upstream companies including ONGC, Oil India and Gail, while the remaining Rs 20,559 crore was paid through oil bonds.
Thanks to a policy turnaround from a year ago, the government now wants oil producers, ONGC and OIL, to share under-recoveries only on auto fuels, while Gail has to compensate for the losses on LPG. This arrangement has helped the oil producers to substantially trim their subsidy burden in the September 2009 quarter. ONGC, which bears the lion’s share in sharing subsidies, is expected to have cut its burden nearly 80% to around Rs 2,600 crore. All the oil companies will be publishing their September 2009 quarterly numbers between October 28 and October 30.
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