IOC shares are a good stock option
New Delhi   23-Feb-2016

India’s largest oil marketing company, Indian Oil Company (IOC) has set up a Rs 35,000 crore refinery in Paradip, Orissa, to be integrated along with a petrochemical complex. While the polypropylene unit has already started, the work on methyl, ethyl, glycol, coke gasification plant and a PTA project with an additional investment of over Rs 30,000 crore is proposed to start soon. The trial run of the new refinery has been completed and the plant should start operating at a 60% capacity, while the management expects it to run at full capacity in the next 18 months. Since its refineries are located in Panipat, Mathura and Barauni and are technically called inland refineries, the Paradip refinery has an added advantage of being a coastal refinery due to its location.

Currently, the average refining margin is in the region of $10-12 a barrel and the new project will add a further $6-7 a barrel thereby, giving a boost to the bottom line. Demand for these products is very high and petrol, diesel, kerosene and LPG will be marketed in the eastern and southern states of the country. The third quarter of the current financial year has been very good for the IOC due to lower than expected inventory losses and strong refining margins.

With continuous robust gross refining margins expected for FY 16-17, every one dollar increase will add around 10% more to the IOC’s earning per share. Even the International Energy Agency in its report expects refining capacity to be lower for the next two years while the gross refining margins to remain robust. The burgeoning energy demand of the country is enormous and the IOC is working towards that goal in a professional method.

Featured in Sunday Gaurdian Live dated 20 February, 2016.