IndianOil cushioned by Govt bonds, lower fuel sale loss
New Delhi   30-May-2009
IndianOil has posted a profit during the fourth quarter of the fiscal ended March 31,2009 as losses for selling fuel below the cost were lower compared to the same, quarter a year ago. The country's largest refiner was also cushioned by issuance of government bonds. Yet its net sales income reported a drop mainly because of sharp decline in crude oil prices in the international market. For the entire fiscal, the company's net profit fell with volatility in the crude prices, which touched an all-time high in July 2008 at over $147 a barrel. The losses it incurred for selling fuel below cost stood at Rs 58,590 crore against Rs 43,900 crore in the previous fiscal. The company also saw its margins shrink significantly during the year against last year mainly due to mounting inventory losses with fluctuating prices, "Our performance must be seen on the back of economic crises and phenomenal volatility in the petroleum prices. While there was a better realisation on bonds against a loss last year, refining margins have been lower. There were also high interest burden and forex losses in the year," said Mr. Sarthak Behuria, Chairman, IndianOil, while addressing a press conference. <b>Expenditure</b> During the year the company's planned expenditure is estimated to be Rs 11,000 crore mainly towards capacity expansion. Non-planned expenditure is pegged at Rs 2,000 crore. IndianOil’s borrowings have come down to Rs 32,000 crore as against Rs 45,000 crore on March 31. "Our borrowings have come down. So long as the prices remain in the current range we will not have to resort to major borrowings. Currently we hold bonds worth Rs 21,450 crore and we expect to get for another Rs 6,200 crore," said Mr. Behuria. IndianOil's holdings in the Oil and Natural Gas Corporation and GAIL India are worth Rs 18,000 crore, which could come in handy for some critical investment plans in the near future. Senior company officials said the previous fiscal was "extraordinary" in terms of the crude price spiral. "We would have been happier to end with a net profit of Rs 10,000 crore but circumstances were difficult," they said. The silver lining in the cloud is that forex fluctuations are expected to be in control this fiscal. "The fact that the rupee is appreciating (against the dollar) and interest rates have come down to 7-8 per cent is also comforting," they said. <b>Deregulation</b> On the Government's proposal to deregulate fuel prices, Mr. Behuria said, "The Government will have to take a balanced view in the interest of consumers vis-a-vis the oil industry. Till that happens, the biggest concern relates to the compensation mechanism for losses incurred on sale of subsidised fuels. "There is still no clear cut policy on this. We got oil bonds last fiscal but have already started reporting losses though lower, this year too. How these will be made up remains to be seen," sources said. According to them, the present crude price levels at $65 per barrel are comfortable but things could "get worrying" should it cross the $100 mark. "World prices are already firming up and we can only keep our fingers crossed that they will stay in check," sources said. The board of directors has recommended a dividend of Rs 7.50 a share. IndianOil's Rs 10 shares closed nearly 7 per cent up on the NSE on Friday at Rs 609.