The projected earnings per share (EPS) of GAIL, Reliance Industries and Indian Oil may be trimmed by 3-6% for FY17, according to analyst estimates.
Post demonetisation, earnings of GAIL, RIL and IOC are likely to be impacted as petrochemical segment accounted for 11-37% of their total operating income in the last fiscal.
ET Intelligence Group: While companies in the oil and gas business are expected to remain largely unscathed in the aftermath of demonetisation, their petrochemical divisions will be hit given their reliance on cash dealings.
Consequently, earnings of GAIL, Reliance Industries (RIL) and Indian Oil Corporation (IOC) are likely to be impacted as petrochemical segment accounted for 11-37% of their total operating income in the last fiscal.
The projected earnings per share (EPS) of GAIL, Reliance Industries and Indian Oil may be trimmed by 3-6% for FY17, according to analyst estimates. Since the petrochemicals trading relies on cash, demonetisation is expected to force traders to destock inventories, thereby, resulting in a sharp fall in demand and prices.
In a recent earnings conference call, GAIL's management said that the petrochemicals segment may be affected due to logistics issues which may be reflected in volumes for November and December. It mentioned 50% increase in the inventory build-up. Polymer production of GAIL increased 15% sequentially led by incremental contribution from its second unit of Pata plant near Kanpur.
For RIL, the petrochemicals segment contributes over one-third to operating profit (EBIT). Due to better spread in the segment, the company's operating margin had touched the 14-quarter high of 15.2% in the September quarter even though the gross refining margins in its core refining division did not increase.
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