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IndianOil tops Businessworld's ‘BW Real 500’ rankings again
BW Real 500 rankings
Indian Oil Corporation Ltd. (IndianOil) has once again topped the Businessworld’s ‘BW Real 500’ rankings for the year 2008, which were released in the latest issue of Businessworld for the week 21-27 October 2008. The BW Real 500 combines an organisation’s current performance (revenues) and its past record (assets built over a period of time). This results in an authentic and reliable account of a company’s finances and strengths. This year, they have also examined India’s top companies on several other parameters, such as the most profitable companies, the biggest loss-making companies and the companies delivering maximum shareholder returns. This is what Businessworld had to say on IndianOil’s performance:
The result – IndianOil back with a bang
Public Sector Undertakings (PSUs) - those incredible temples that fuelled India’s adamant bid for self-reliance - have kept their relevance in a rapidly industrialising nation. That relevance is reflected in the BW Real 500, where four of the top five companies are PSUs, as are eight of the Top 20.
The four leading public sector oil companies - IndianOil, Oil and Natural Gas Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation have performed exemplarily to be on top even as global crude oil prices have been on a swing during last year.
Special mention must be made of the commendable human resource management of the PSUs. Each of the top 20 companies has withstood attrition in the face of huge odds, and provided shareholder value in a competitive environment. This, despite the pulls, pressures and constraints that a ‘government company’ tag inevitably brings.
Companies such as Indian Oil Corporation and Bharat Petroleum, which faced severe cash crunch this summer, remain in the Top 5, and will likely stay there as long as demand continues to grow.
IndianOil has gained inroads into downstream and upstream activity. In downstream petrochemicals, it is setting up the world’s largest single-train Linear Alkyl Benzene plant with an annual capacity of 120,000 tonnes at its Gujarat refinery. Its paraxylene/purified terephthalic acid plant (annual capacity: PX - 363,000 tonnes, PTA - 553,000 tonnes) for polyester intermediates is already in operation at Panipat, while a naphtha cracker with a capacity of 800,000 tonnes of ethylene per annum is also coming up at Panipat. A refinery-cum-petrochemical complex at Paradip is to be completed by 2011-12.
In upstream exploration and production, it has bagged eight oil and gas blocks, and two coal-bed-methane blocks under NELP-VII. It has also acquired participating interest in two onshore blocks in Assam and Arunachal Pradesh. Its overseas ventures include two blocks in Libya, Farsi Exploration Block in Iran, an onland block in Nigeria and two onshore blocks in Yemen. “Our participation in NELP would help us become an operator (of oil fields) and expand our portfolio,” says Sarthak Behuria, Chairman of IndianOil.
"It’s the right move for a company that is omnipresent in the entire petroleum value chain," says Ajay Arora, partner at Ernst & Young.
IndianOil also plans to set up mini-liquefaction plants to source gas from the country’s marginal fields, and transport gas from Dahej and Pen in Gujarat. It has also firmed up clean development mechanism projects worth Rs 24 crore at its Haldia refinery. This would help generate carbon credits and reduce production cost.
All that puts IndianOil on a sound footing, but its biggest rival in India, Reliance Industries (RIL), has taken a big leap forward with KG-D6, capable of producing 550,000 barrels of oil equivalent a year, about 40 per cent of India’s total energy production. Behuria, though, is unfazed. He says private oil companies are in greater pain than public sector companies. “So there is no challenge on the marketing side from them,” he says. On the refinery side, RIL and Essar are the only major contenders for IndianOil’s position. However, as they are focusing on exporting markets, and are developing gas in KG Basin, “we do not see them as competitors unless things change on the marketing side”, says Behuria.
Things were not so optimistic earlier this year. The skyrocketing crude prices since April had almost crippled IndianOil. In July, the under-recoveries of oil companies had touched Rs 2, 00,000 crore, with IndianOil accounting for close to half of it. But despite a 5 per cent fall in margins, experts say IndianOil has managed the situation well. “It has been in every aspect of the oil business and knows it well,” says Arora.
Though global crude prices are down, IndianOil still needs to do demand-side management. The company’s agenda for next year needs to focus on downstream and upstream projects.
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| Updated on October 20, 2008 |
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