oil: Windfall tax could erode earnings of oil companies, refiners by 5-15%

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Typically, refining companies are ascribed EV/EBITDA multiples of 8-9 times in upcycles; this may drop by 1-2x due to the windfall tax and uncertainty over sunset for the recently introduced export curbs.

Synopsis

Stocks of refiners and explorers plunged last week after the government announced the tax. ONGC and Reliance Industries (RIL) were the leading Nifty decliners Friday: The state-run oil explorer lost more than 13% while RIL, the biggest stock on the gauge, fell more than 7%.

ET Intelligence Group: The Centre’s decision to impose windfall taxes on refiners and oil explorers is likely to see an earnings cut of 5-15% in the ongoing fiscal on lower revenues, lengthening the odds on earnings upgrades and weighing on the ascribed valuation multiples for energy companies.

Stocks of refiners and explorers plunged last week after the government announced the tax. ONGC and Reliance Industries (RIL) were the leading Nifty

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