IOC Q4 net down 30% as subsidies weigh

IOC Q4 net down 30% as subsidies weigh

Mumbai: Indian Oil Corporation, the country’s biggest refiner and oil retailing firm, on Monday reported a 30% slump in fourth-quarter profit, weighed by rising under-recoveries on petroleum products sold at subsidised rates.

The state-run firm said it was currently incurring a revenue loss of 261 crore ($57.8 million) daily on account of fuel sales at below-market prices.

India granted autonomy to state-run refiners last year to fix retail prices for petrol, but the government continues to control prices of diesel, cooking gas and kerosene.

New Delhi has said it wants to loosen control of fuel prices, but has found the going difficult after global crude rose nearly 17% in the fourth quarter, on top of a 14% rise the previous quarter.

For the full year ended March, IOC’s under-recoveries rose to 3803 crore, from 3159 crore in the previous year, despite receiving higher compensation from the government in the year.

The higher under-recoveries, combined with higher interest costs and depreciation weighed on the bottomline, Chairman RS Butola told reporters.

“We will need to borrow 5000 to 6000 crore (a month) unless either a view is taken on increasing prices or we get faster disbursement of cash support from government," he said.

IOC currently holds debt of 67880 crore, up from 52730 crore as at March-end.

Q4 profit slips

IOC, India’s biggest refiner with a total capacity of 1.294 million barrels per day (bpd), said its fourth-quarter net profit fell to 3905 crore from 5557 crore a year earlier.

Net sales rose 31.4% to 86880 crore.

IOC posted gross refining margins of $7.85 a barrel in the March quarter, more than double $3.38/barrel a year ago, on the back of higher crude oil prices.

State-run fuel retailers - IOC, Bharat Petroleum Corp and Hindustan Petroleum Corp - last raised petrol prices by 8.6% in mid-June, but the prices still do not fully reflect international crude prices.

The Indian government had planned a share sale of up to $4.4 billion in IOC, but it has been delayed due to unfavourable market conditions and rising global crude oil prices.

The public issue, earlier planned for the first quarter of 2011, includes a 10% stake sale by the Indian government and an equal number of new shares by IOC.

Shares in IOC, valued by the market at $17.1 billion, have declined 6.7% so far in 2011, but are down nearly a third from their peak in September 2010 as rising crude prices push up the subsidy share. The main stock index is down 11.1% so far in 2011.

On Monday, shares in the company closed 0.3% lower after the results announcement in a weak Mumbai market.