Reliance Industries Rebounds After Worst Weekly Loss

Shares of Reliance Industries Ltd. rebounded on Monday following the worst weekly loss in a decade after the government asked state-owned oil retailers to absorb Re 1 cut in fuel prices.

The stock gained nearly 6 percent, the most in over a year, according to Bloomberg data. In the week ended Oct. 6, shares of the Mukesh Ambani-led company, along with its state-owned peers, had tumbled as much as 17 percent—the most since the financial crisis in 2008.

The government’s move to cushion customers from rising crude and weakening rupee by asking state-owned oil marketers to absorb a portion of fuel price cut will impact private retailers too. That would force oil marketing companies to lower gross marketing margins, the mark-up earned on every litre of petrol and diesel sold.

Lower prices charged by state-owned marketers could either lead to market share losses for private retailers or force them to reduce margins, impacting financials.

Yet, that may not be a big worry for Reliance Industries. While the oil-to-retail conglomerate has more than 1,300 fuel stations in India, the segment contributes only 0.3 percent to the company’s consolidated earnings before interest, tax, depreciation and amortisation.

The last week’s selloff was also led by a depreciating rupee that touched a record low of 74 against the U.S. dollar amid higher crude prices. As on March 31, Reliance Industries has a total unhedged foreign exposure of Rs 1.07 lakh crore, according to its annual report. That’s 25 percent of its total liabilities and could raise its interest and principal payments.

Before the selloff, shares of the company had risen nearly 37 percent year-to-date and it was the most expensive energy stock, according to the data compiled by BloombergQuint.