Inventory losses for refiners, traders and manufacturers of downstream petroleum products because their raw material purchases would have been at higher.
The multiple downward revision in oil prices may have been cheered by the consumers but the oil companies and allied sectors like refiners are likely to bleed Rs 16,000 crore, Crisil said.
The 33% decline in global oil prices from September to December 2014 forced downward revision in prices of petrol and diesel, including other derivatives like polymers and chemicals that declined close to 30%.
Crisil said, "This will mean inventory losses for refiners, traders and manufacturers of downstream petroleum products because their raw material purchases would have been at higher."
Also Read: Oil prices crashes to below $50 as fears of supply glut deepen
The aggregate inventory losses of players in the oil chain, according to Crisil, is around Rs.16,000 crore in the third quarter of the current fiscal.
Crisil said that as the price drop was passed on to the consumers, a substantial share of these losses will be borne by refiners.
It said, "Our calculations are based on an analysis of about 250 CRISIL-rated companies including refiners, traders, polymer processors, and bulk and specialty chemical manufacturers. These companies have average total inventory holding of about 45 days; it typically ranges between 30 and 60 days, depending on the location of plant, processing time, and price outlook."
For oil marketing companies, the losses are partly offset by higher profit margins from retail sales of petrol and diesel after deregulation of prices.
Also Read: Oil down almost 10% in 2 days as hunt for bottom continues
Pawan Agrawal, Chief Analytical Officer, Crisil Ratings said, “Support from the Government of India given it’s strategic importance, higher profit margins on marketing of petroleum products, lower dependence on subsidy payments, and lesser working capital loans will sustain the credit profiles of oil refiners.”
“We expect the impact to be higher on credit profiles of companies that have weak debt protection metrics, elevated gearing levels, and higher inventory holding,” said Agrawal.
Crisil said that is in the process of assessing the impact of the sharp fall in prices of crude oil and its downstream products on companies, and will be coming out with rating actions wherever necessary.
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