RIL stock sheds morning gains as BSE Sensex tumbles over 600 points

The Reliance Industries (RIL) stock shed early morning gains in trade on Tuesday amid a weak market. While the BSE Sensex tanked over 600 points, the RIL stock was trading flat at Rs 2,765.25 apiece at 12 noon. Nearly 80,000 shares exchanged hands on the BSE, as investors remained cautiously optimistic about the stock.

RIL, says a report by Citi Research, is the biggest beneficiary of rising crude oil imports from Russia. Among refiners, RIL's high product export ratio, and relatively minor domestic retail operations, with added benefits from sourcing discounted crude would aid its gross refining margins, Citi said in its report dated June 5.

Morgan Stanley, on the other hand, said that RIL's margins would be 50 per cent above their last peak season in mid-2008.

"Globally, we expect a shortage of one refinery annually for the next few years. If we were to include arbitrage crude advantages, which RIL highlighted earlier, margins would be even higher," Morgan Stanley Research said in its report dated June 6.

Crude oil imports from Russia, according to Citi, have risen to over 15 per cent of India’s total imports in the last two months (April and May) compared to historical levels of 1-2 per cent. Based on back-of-the envelope calculations, Citi has assumed that a $15-a-barrel discount on roughly 20 per cent of the crude mix could boost RIL’s gross refining margins by almost $3 a barrel.

“Every $1-a-barrel increase in Reliance's GRM increases its consolidated FY23 earnings per share (EPS) by around 4 per cent," the brokerage house said.

For India’s three oil marketing companies—Bharat Petroleum, Hindustan Petroleum, and Indian Oil Corporation—every $1-a-barrel increase in GRM raises their FY23 EPS by around 16 per cent, 14 per cent and 16 per cent each, Citi said.

But every Re 1-a-litre decline in marketing margins adversely impacts their respective earnings by 35 per cent, 40 per cent, and 26 per cent, respectively.

To completely offset a Re 1-a-litre decline in marketing margins, these companies would need $1.6-2.8-a-barrel boost in GRM, it added.