Fuel subsidy burden may rise to Rs 43654 cr: KR Choksey

KR Choksey has come out with its earnings estimates on oil and gas sector for September quarter FY13. According to the research firm, Falling gas output from KG-6 is major concern for the Gas sector, Gas transmission through pipelines are moving downward and City gas distribution companies are facing problems of higher import of LNG with depreciating rupee impact.

Overall fuel subsidy burden will rise to Rs 43654 cr even fall in Indian Crude basket to the level of $107/bbl, did not helped to arrest increasing under-recoveries mainly due to depreciation of rupee. The expansion in refining margins was largely led by middle distillates followed by some improvement in gasoline and naphtha as well, while demand from the petrochemical sector remained muted. We will see improvement in refining margins due to better demand for middle distillates. Petrochemical deltas are flat on Q-o-Q. Falling gas output from KG-6 is major concern for the Gas sector, Gas transmission through pipelines are moving downward and City gas distribution companies are facing problems of higher import of LNG with depreciating rupee impact. Asian LNG spot prices on the other hand softened to US$ 13/mmbtu.

Factors to watch in the Q2 FY13 result

• RIL will post GRM $9.8/bbl which would be premium of $0.7/bbl to singapore GRM
• Falling gas output from KG-D6 to ~ 29.5mmscmd
• Surprise on forex loss from Cairn India

Top Picks: Cairn India, Petronet LNG

Company	Sales (Rs Cr)		PAT (Rs Cr)
	FY13E	FY14E	FY13E	FY14E
Reliance Ind	361,461	373,627	22,253	23,051
ONGC	175,771	186,373	32,284	30,102
Indraprastha Gas	2,682	2,872	94	113
Cairn India Ltd	20,479	20,268	12,113	11,162
Petronet LNG	23,815	28,311	1,096	1,269
GAIL India Ltd	46,960	58,383	4,336	4,790