In the wake of inventory losses due to dip in international oil prices, country’s largest oil retailer Indian Oil Corp (IOC) on Thursday posted a 45 per cent drop in its first quarter net profit this current fiscal. The net profit of the oil company in the April-June period stood at Rs 4,548.51 crore as against Rs 8,268.98 crore during the corresponding time last fiscal.
“Variation in the net profit is primarily due to inventory losses,” IOC Chairman Sanjiv Singh, who chaired the company's quarterly results meeting for the first time, told reporters here.
“IOC earned $4.32 on turning every barrel of crude oil into fuel in the quarter as compared to $9.98 a barrel gross refining margin or GRM in the year-ago period,” he said. However, IOC Director (Finance) AK Sharma said that the company suffered an inventory loss of Rs 2,033 crore on crude oil in Q1 as compared to an inventory gain of Rs 3,785 crore in the same period a year ago. On products, there was an inventory loss of Rs 2,009 crore as compared to Rs 3,695 crore of gain last year. Inventory loss of any oil firm occurs when the oil prices fall after procurement and before marketing. The oil major lost Rs 4,042 crore in the quarter owing of inventory losses arising from drop in international oil prices.
As far as the inventory loss is concerned, GRM would have been $6.44 per barrel in Q1. This would have compared to $3.56 a barrel of GRM without accounting for inventory gain in the same period of previous year. The slump in profit would have been larger but for Rs 2,808.05 crore write-back after settlement of liability for entry tax in Haryana. Singh, however, said IOC sold 20.736 million tonne fuel in the domestic market and 1.772 million tonne abroad during the first quarter of 2017-18. This is compared to 20.415 million tonnes domestic sales and 0.963 million tonnes of exports in the same period of 2016-17.
During the quarter, the company accounted for Rs 876.38 crore from the Government as subsidy support for selling kerosene at below-market rate. Revenue soared to Rs 129,418.11 crore in the quarter under review, from Rs 107,670.95 crore a year ago. Company debt reduced to Rs 34,922 crore as on June 30 from Rs 54,820 crore as on March 31 after it repaid some of the loans.
Meanwhile, IOC is planning strengthen the purchase of crude oil from the US and will this month tender for second cargo as it looks at cheaper alternatives that have emerged due to a global supply glut. "We will this month tender to buy 2 million barrels of crude oil," Sharma said.
IOC had sealed a deal last month to import 1.6 million barrels of crude from the US for delivery in the first week of October to its Paradip refinery in Odisha -- the first ever such purchase of US crude by an Indian state-run refiner. “There are 6-7 grades of US crude. The second cargo will be for delivery in November,” he added.