New Delhi: Indian Oil Corp. Ltd tripled fourth-quarter profit, beating analyst estimates, after the government compensated the nation’s biggest refiner for selling diesel and cooking fuels below cost.
Net income rose to Rs 12,670 crore, or Rs 52.19 a share, in the three months ended 31 March from Rs 3,910 crore, or Rs 16.08, a year earlier, according to a statement on Monday. The median of 22 analyst estimates compiled by Bloomberg was a profit of Rs 9,350 crore. Sales rose 30% to Rs 1.28 trillion.
Indian Oil and state-run rivals Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd increased petrol prices last week to cover rising oil import costs as the rupee slumped to a record low against the dollar. While compensation from the government helps the refiners to cut losses and reduce debt, finance minister Pranab Mukherjee is under pressure to curb spending to rein in the budget deficit.
Government compensation helped them post profits this quarter but there’s always a lot of uncertainty on earnings, said Rina Sanghavi, an analyst at SPA Securities Ltd in Kolkata. The major boost would be if the government deregulates prices of other fuels and that isn’t a likely scenario. At least a hike in diesel prices would be required to help the refiners.
Indian Oil shares rose 0.06% to Rs 265.50 on BSE on Monday.
The government gave Indian Oil Rs 45,490 crore as subsidy in the year ended 31 March, compared with Rs 22,600 crore a year earlier, according to the statement. Government support helped Bharat Petroleum report profit for the quarter after losses in the first half.
The refiners sell diesel, kerosene and cooking gas below cost to help curb inflation. The companies are free to set gasoline prices.
Indian Oil raised petrol prices by 11% on 24 May for the first time in almost seven months after the rupee’s slump countered a drop in oil prices. India buys 80% of the oil it uses from overseas and crude shipments accounted for 32% of the country’s $489 billion (Rs 27 trillion) import bill in the year through March.
The three state refiners lost Rs 510 crore daily on diesel, kerosene and cooking gas sales as of 16 May, according to oil ministry data. Indian Oil earned $4.25 for every barrel of crude it turned into fuels in the quarter compared with $7.56 a barrel a year earlier.
Separately, the company’s head of refineries R.K. Ghosh said on Monday that Indian Oil plans to shut a crude unit and a fluid catalytic cracking unit (FCCU) at its 150,000 barrels per day (bpd) unit at Haldia plant in eastern India in June for maintenance. Ghosh said the firm will also shut a vacuum distillation unit (VDU) at its 274,000 bpd Gujarat refinery during June-July for maintenance. The official, however, did not specify the duration of the planned shutdown at both the refinery units.
Nidhi Verma of Reuters contributed to this story.