Country's largest oil refiner and marketer Indian Oil Corporation Ltd (IOCL) will invest ₹26,000 crore as part of its capital expenditure plan this fiscal even as it reported a loss of ₹17,318 crore for the March quarter (Q4) of fiscal 2019-20 on the back of inventory losses and low fuel demand.
IOCL's inventory loss stood at ₹14,692 crore in fourth quarter of last fiscal, as compared to a gain of ₹1,787 crore a year ago.
"Since our projects take some time to start production, we are not deferring any of the ongoing projects. As far as the capex of the ₹26,000 crore is concerned, we are hopeful that we will be able to do that and our internal sources will also recover to support that capex," Sandeep Kumar Gupta, Director Finance, IOCL, told analysts.
Of the ₹26,000 crore, IOCL will spend ₹4000 crore on reﬁning, ₹4500 crore on pipeline, ₹6000 crore on marketing, ₹2300 crore on PetChem and ₹4800 crore on a few joint venture investments including city gas distribution.
Last fiscal, IOCL's capex was at ₹28,000 crore.
Gupta added that the company will be very cautious to go ahead with any future projects and that the company will take into consideration the demand destruction caused by covid-19, which may perhaps take one or two years to revive.
The covid-19 induced lockdown impacted fuel demand and thereby revenues for the oil companies.
The demand for gasoline was about 42% in April and 64% in May. It has, however, recovered to about 84% in the ﬁrst three weeks of June. Similarly, for gasoil the demand was about 45% in April, 69% in May, and is about 87% in three weeks of June.
IOCL has sought permission from its board for increasing its borrowing limit to ₹1,65,000 crore. It will be approaching the shareholders during its annual general meeting for approval of the same.
“I must clarify that this is only an enabling provision, so that we are not required to go frequently to the shareholders.," Gupta said adding that the last such increase was sought 10 years back. Though we are taking this enabling authorization from the members, we do not anticipate our borrowings to go to that level, Gupta said.
IOCL's borrowings as on 31 March stood at ₹1,16,545 crore as compared to ₹86,359 crore as on 31 March 2019. However, the internal accruals remained muted during 2019-2020, mainly on account of inventory losses and subdued reﬁning margins, as well as petrochemical margins, the company said.
During the last fiscal, IOCL’s reﬁneries registered a negative gross refining margin (GRM) of $9.64 per barrel during the fourth quarter, which was primarily due to the huge inventory losses, brought upon by the crash in oil prices.
The normalized GRMs however, after stripping oﬀ inventory impacts and factoring in price lags for the quarter is $2.15 per barrel and for the full year were at $2.64 per barrel as against $4.81 per barrel in the year 2018-2019.