New Delhi: India’s largest oil marketing company, Indian Oil Corp. Ltd (IOC), said on Thursday its first quarter profit surged almost nine times as it benefited from lower oil prices and interest rates and posted foreign exchange and inventory gains.
Net profit in the June quarter rose 787.46% to Rs3,683 crore from Rs415 crore a year earlier, while revenue declined 21.32% to Rs63,521 crore from Rs80,735 crore.
Chairman and managing director S. Behuria attributed the profit “to stability and lowering of crude oil prices, which had a very positive impact on the oil marketing companies.”
Extreme volatility has marked oil prices, that touched $147 per barrel in July 2008. The prices have declined 50% over the past year. Countries such as India are dependent on imports to meet their oil needs and are particularly vulnerable to price volatility.
India—the world’s fifth largest energy consumer—imports 75% of its needs and accounts for some 3.5% of global consumption. It will become the third largest oil importer after the US and China before 2025, with its energy needs almost doubling by 2030, the International Energy Agency estimates.
Foreign exchange gains contributed Rs6,52.79 crore versus a foreign exchange loss of Rs1,590.50 crore in the year-ago period. The company also made a profit of Rs1,733 crore on account of inventory gains.
Its borrowing fell to Rs33,678 crore as of 30 June from Rs44,972 crore as on 31 March. The firm also gained as borrowing costs fell from around 15% last year to 6% now.
IOC’s refinery margin dipped significantly to $7.36 a barrel from $16.81 as crude prices plunged.
Refinery margin is revenue earned from processing a barrel of crude.
“One is not sure whether under the present environment one can expect to see such trends continue into the next year. The environment continues to be fairly volatile,” said Monish Chatrath, national markets leader at consultancy Grant Thornton India.
“One can expect to have greater clarity once there is a definite upturn swing in the global economy,” he added.
The company posted a net revenue loss of Rs2,961 crore on account of selling fuel below cost. The company is at present losing Rs1.17 per litre, 6 paise per litre, Rs16 per litre and Rs96.52 per cylinder on petrol, diesel, kerosene and domestic cooking gas sales, respectively.
S.V. Narasimhan, director (finance), said: “We ideally need to generate internal resources of around Rs15,000 crore per annum to continue with our ongoing projects or there will be a problem. ”
The state-run company also dropped hints that it was in talks with the promoters of Gulf Keystone Petroleum Ltd for a possible acquisition of the London-listed oil firm.
IOC shares rose 4.08% to Rs556.30 per share on the Bombay Stock Exchange on Thursday as the benchmark Sensex index gained 1.41%.
PTI contributed to this story.