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25th June 2008
ONGC to clock windfall profits
Despite Output Stagnation, Soaring Crude May Help Co Post Rs 20,000-Cr FY08 Profit
Ramkrishna Kashelkar ET INTELLIGENCE GROUP
SCALING a major milestone, ONGC — India’s largest oil and gas producing company — is expected to report a net profit in excess of Rs 20,000 crore for the year ended March 2008 — a feat no other Indian company has enjoyed so far. ONGC will be publishing its results for FY08 on June 25, 2008.
While ONGC’s production of oil and gas continues to stagnate, its performance will get a boost from higher crude oil prices. “Crude oil price moved up to $100/barrel in Q4FY2008 from $60/barrel a year ago, which more than offset the negative impact of 10% Y-o-Y appreciation in rupee against dollar,” noted a research report by Karvy Stock Broking. The brokerage house expects ONGC to post net profit of Rs 20,755 crore for the financial year ended March 2008.
Another factor which will boost the company’s performance is the improving performance of its subsidiaries. Thanks to improved business environment, MRPL — a 72% subsidiary of ONGC — reported 142% spurt in profits for FY08 to Rs 1,272 crore Similarly, net profit of its wholly-owned subsidiary ONGC Videsh (OVL) jumped 44% to Rs 2,397 crore in FY08 assisted by higher production. OVL’s crude oil production jumped 18% to 6.81 million tonne during FY08 as against 5.77 million tonne in previous year. However, OVL has not benefited fully from the rising crude oil prices. “In the regions where OVL operates, the governments take away a significant chunk of the price benefit. That’s why OVL is not able to draw full benefit of the high crude oil prices,” said a senior research analyst with an international broking firm. The firm projects per share earnings (EPS) of Rs 95 for ONGC for the whole year, which is 14.5% higher on Y-o-Y basis.
At ONGC’s current market price of Rs 845, this will translate in a price-to-earnings multiple (P/E) of 8.9 — a level last seen four years back in June 2004. The company has already paid interim dividend of Rs 18 per share and considering the Rs 31 dividend paid last year, is likely to declared another Rs 13 as final dividend.
ONGC has to share the burden of subsidy to the oil marketing companies by way of discounts on sale of crude oil. During the year ended March 2008, discounts offered by the company increased 29% to Rs 22,000 crore.
ramkrishna.kashelkar@timesgroup.com
24th June 2008
Bears go hammer and tongs at RIL
Pull Down Scrip Below Rs 2,000; Stock’s Now 37% Off Its All-Time Peak In January
Ramkrishna Kashelkar ET INTELLIGENCE GROUP
AN ELEMENT of frustration was inescapable among thousands of retail investors watching the Reliance Industries stock getting hammered by the bears. After nine months, the shares of India’s largest private sector company — Reliance Industries (RIL) — once again slipped below the Rs 2,000-mark amid heavy volumes. Though at the close of trading, the stock crawled back over Rs 2,000, it had lost over 37% from its peak in January, with market capitalisation falling below the Rs 300,000 crore-mark. The Mukesh Ambani-controlled RIL is India’s most widely-owned company with around 2.1 million retail shareholders.
In October 2007, Mr Ambani, while addressing shareholders at the company’s AGM, had said, “Between March 2002 and October 2007, the market capitalisation of RIL has grown from Rs 41,989 crore ($8.6 billion) to Rs 3,82,259 crore ($97.3 billion).” Despite the erosion in value since then, some find the scrip attractive at current levels. For instance, Lalit Thakkar, director (research) at Angel Broking, said: “The stock has corrected significantly from its highs. The company would benefit out of the commercialisation of the KG Basin and the RPL Refinery, expected by second half of FY09. This would provide fillip to the overall earnings of the company going forward. Thus the correction provides a good opportunity for the retail investors to buy into the scrip.”
Although RIL’s future growth is not in doubt, not everyone feels that the worst is over for the scrip. A research head at a large domestic research institution said, “RIL is an over-owned stock; owned not just by retail or institutional investors but by speculators as well, which made it fall steeply on weak sentiments. We do not yet know if the stock has bottomed out. On the other hand, despite weak sentiments in the markets, RIL’s fundamentals remain strong.” RIL is more susceptible to fluctuations when the market swings, which is reflected in its beta at 1.12.
At the current market price of Rs 2,022, RIL is now trading at a price-to-earnings multiple (P/E) of 15.1 — a level last witnessed in August 2006. In comparison, the 32% fall in Sensex has been less severe, which has left the Sensex P/E at 17.4 — higher than that of its largest constituent.
ramkrishna.kashelkar@timesgroup.com
18th June 2008
Higher margins keep BPCL in the black
Ramkrishna Kashelkar ET INTELLIGENCE GROUP
IN the current difficult times, India’s second-largest oil marketing company Bharat Petroleum (BPCL) achieved what its peers failed to do. Defying the problem of rising under-recoveries, the company has posted a net profit for the March ’08 quarter. The industry leader IOC had reported net losses in the latest quarter, while HPCL’s pre-tax losses got converted into profits, thanks to onetime write back of tax provisions.
While giving the positive performance, BPCL had to battle a few odds, apart from the perennial problem of under-recoveries. BPCL’s other income halved in the fourth quarter against the corresponding quarter of previous year while the production at its Mumbai refinery was 9% down due to a maintenance shutdown in March. However, a spurt in the gross refining margins (GRMs) and higher support from upstream companies and the government came to BPCL’s rescue. Particularly, the performance of its Kochi refinery, which accounts for nearly 40% of the company’s total production, was stronger. Improved business environment helped the GRMs at its Kochi refinery move beyond $9 per barrel during the quarter from $7.2 earlier. However, its Mumbai refinery, which suffers from 3% octroi charges, witnessed stagnant GRMs.
During the quarter BPCL’s net sales (excluding oil bonds) moved up 23% to Rs 28,607.1 crore. The amount of oil bonds received during the quarter was nearly four-and-a-half times higher from corresponding previous quarter at Rs 3,971.5 crore. The discounts received from upstream companies such as ONGC, Gail and Oil India doubled to Rs 2369.20 crore. However, as the other income halved and interest and depreciation costs increased, the pretax profits were just 40% of what were reported in last year. After providing for taxes the net profits at Rs 58.40 crore were less than 10% of last year.
For the entire year ended March 2008, the company posted a net profit of Rs 1,769.6 crore on a consolidated basis, which was 17% lower against year ago levels. During the year, the company received Rs 8,589.5 crore (up 64% on y-o-y) as assistance from the government and Rs 5,975.1 crore (up 34% on y-o-y) as discounts from upstream companies such as ONGC, Gail and Oil India.
The company completed the formalities of transferring its participating interests in 24 blocks in India as well as abroad to its wholly owned subsidiary Bharat Petro Resources (BPRL). The company plans to invest around $200 million in these assets during the current fiscal year.
Going forward, the company’s refinery operations are likely to benefit from improving GRMs, thanks mainly to globally high petrol and diesel prices. However, its marketing operations continue to reel under the pressure of under-recoveries. Despite the price increases earlier this month, the company continues to lose Rs 11.9 per liter on petrol, Rs 23 per liter on diesel, Rs 36 per liter on kerosene and Rs 288 per cylinder on LPG. ramkrishna.kashelkar@timesgroup.com
23rd June 2008
The Right Choice
A very low beta, high dividend yield and stability in its growth outlook make Indraprastha Gas an ideal investment choice in these uncertain times
RAMKRISHNA KASHELKAR ET INTELLIGENCE GROU P
NDRAPRASTHA GAS (IGL) is a Delhi-based city gas distributor promoted by GAIL, Bharat Petroleum (BPCL) and the government of Delhi together holding 50% stake. The company distributes compressed natural gas (CNG) and piped natural gas (PNG) in Delhi and nearby region. With high inflation and slowing global economic growth, the company is expected to grow steadily over the next few years, thanks to its mature business model, strong cash flows, healthy returns on capital and assured supply of natural gas.
BUSINESS:
Under the administered pricing mechanism, IGL gets a total allocation of 2 million metric standard cubic meters a day (mmscmd) of natural gas from GAIL, which is nearly 25% more than the company’s current gas sales.
The company derives over 90% of its revenue through the sale of CNG for automobiles, while the rest comes from PNG. During FY08, CNG sales volume increased by 12.3% to 3,862 lakh kg and PNG sales volumes increased by 17.2% to 43 million standard cubic meters (mscm) over FY07. On an overall basis the sales volumes grew 12.6% to 549 mscm during FY08.
With a number of new commercial and retail customers shifting to piped natural gas, the company has witnessed a strong cumulative annual growth of 39% over the past six years in this segment. In comparison, the sales in the CNG segment have grown at a slower rate of 25%.
GROWTH FACTORS:
After witnessing fast growth in initial years after its incorporation, the company is expected to see a steady growth in the years to come. CNG and PNG being highly cost efficient options to petrol and LPG, consumer acceptance for these alternative fuels is growing fast. Also, expansion in adjoining regions will provide the company access to other lucrative markets. For this, the company will invest around Rs 250 crore annually over the next couple of years.
Commissioning of the Petroleum and Natural Gas Regulatory Board (PNGRB) earlier this year and its recommendations afterwards had created doubts about IGL’s future profitability. However, the marketing margins charged by the company remain out of regulatory control and hence the company is not required to change its tariff rates. This ensures the sustenance of IGL’s profit growth in future.
FINANCIALS:
IGL came out with a marginally improved performance for the quarter ended March ’08. It earned a net profit of Rs 48.2 crore on net sales of Rs 187.4 crore. Sales were 14% higher yearon-year (y-o-y), while the net profit was up 20%. For the whole year, the company posted 26.5% growth in net profit to Rs 174.5 crore while its sales grew 15% to Rs 706 crore.
IGL has reported consistent growth in operating profit margin over the past few years. It closed FY08 with an operating margin of 42.5% against 41.2% in the previous year. However, the last quarter of FY08 witnessed a slight erosion in margin to 41.8% from 43.3% in the corresponding period in the previous year.
The company holds a healthy track record of dividends. The rate of dividend has increased consistently over last six years to reach 40% in FY 2008. At the current market price of Rs 118, this translates in a dividend yield of 3.4%.
VALUATIONS:
The price-toearnings (P/E) multiple of Indraprastha Gas at the current market price of Rs 118.7 works out to 9.5. Its peer Gujarat Gas is trading at a P/E of 9.9. The current high inflation is expected to favour the company, which offers low-cost alternatives to highcost petroleum products. Considering the growing number of CNG vehicles in the Delhi region and the fact that high prices of LPG are forcing retail consumers to shift to PNG, we expect the company to grow at 20% per annum over the next two years. A very low beta, high dividend yield and stability in its growth outlook make it an ideal investment choice in these uncertain times.
ramkrishna.kashelkar@timesgroup.com
9th June 2008
WANNABE STARS
There’s a lot happening, away from the glamorous & glitzy world of high-visibility sectors. Ramkrishna Kashelkar digs deep & unearths some uncut diamonds
THEY SAY, more than a tonne of dirt needs to be shifted to find every single carat of diamond. The same applies to the vast universe of small companies. It is a daunting proposition to sift through an endless list of obscure industries in the hope of hitting on some gems. No wonder, most of the analysts stick to companies in the more glamorous sectors such as IT, pharmaceuticals, FMCG, capital goods and infrastructure among others. ETIG undertook this difficult task long ago. We have so far covered small industries such as solvent extraction, food processing, chemicals and sugar. This week, we thought of researching a few more small and obscure industries just to check on the kind of action taking place there. We find that away from the limelight, quite a few companies in these sectors are thriving and waiting for their time to come. However, there is a caveat: most of the companies operating in these sectors are small-caps and, as such, may be subjected to erratic price movements from time to time. So, due caution must be exercised while investing in them.
DYES & PIGMENTS
The dyes and pigments industry provides colourants to textiles, paper and leather industries. Besides, pigments are also used in paints and printing inks. This industry exports a chunk of its products and has long been suffering due to Chinese competition. However, the worst may be over for this industry. Chinese competition has receded as the Chinese government has cut back on fiscal benefits to its exporters, while tightening of environmental norms weeded out many marginal players. With energy costs going up substantially, the industry is now finding that global customers are ready to accept higher prices.
In India, a number of large players are operating in this industry such as Clariant India, Atul Industries and Sudarshan Chemical, among others. Hardly any capital expenditure is taking place in the industry currently, due to global oversupply in some of the major types of dyes. As a result, domestic players are investing in backward integration. Recently, Kiri Dyes & Chemicals raised funds from the primary market to build capacities for raw materials. Similarly, Atul completed the expansion of its facilities for key dye intermediates in September ’07. Diversification into related chemical businesses has proved to be another way out for dye manufacturers. Companies such as Meghmani Organics and Atul derive a chunk of their revenues from agrochemicals. The pigments industry has witnessed some capacity expansions over the past couple of years. Asahi Songwon Colors and Shreyas Intermediates have expanded their capacities of blue and green pigments.
A number of these companies have been paying dividends consistently and are currently trading at attractive dividend yields. Companies like Ultramarine & Pigments, Atul, Bhageria Dye Chem, Bodal Chemicals and Metrochem Industries witnessed higher dividend yields.
PESTICIDES
The pesticides or agrochemicals industry continues to remain an obscure one, as its dependence on several factors makes it almost impossible for anyone to predict its growth. The companies in the sector are directly dependent on the agriculture industry. However, a number of factors such as the pattern of the monsoon and pest attacks affect the industry directly. A change in the area under cultivation for crops that require maximum pest protection, such as cotton, will also affect the industry performance. Apart from all these, agrochemical companies require a wide distribution network, strong brands, and a comprehensive product portfolio backed by extensive market research to sustain in this highly competitive industry.
United Phosphorous has emerged as an Indian MNC in this space through major acquisitions over the past 2-3 years. It now figures among the top three global generic agrochemical companies and has a wide range of products, besides subsidiaries expanding in the seeds business.
The other leading players such as Excel Crop Care, Punjab Chemicals & Crop Protection and Rallis India are also taking various steps to sustain their growth. Rallis has performed particularly well by restructuring its business by selling off extra assets and focusing on its core business. The companies are diversifying their portfolios by adding other farm inputs such as seeds, nutrients and bio-pesticides to their agrochemicals portfolio. Punjab Chemicals & Crop Protection, which was hitherto predominantly a bulk manufacturer, is now moving into selling formulations in the retail segment. It further plans to grow inorganically and is looking for suitable opportunities.
The monsoon this year is predicted to be better compared to the previous couple of years. Similarly, strong agri-commodity prices and the farm loan waiver scheme announced by the government are expected to improve the liquidity situation of small farmers, all of which augur well for the agrochemicals industry in general.
INDUSTRIAL GASES
A variety of industrial gases such as oxygen, carbon dioxide, argon and nitrogen are required in a host of industries such as steel, fertilisers, glass, automobiles and healthcare. The industrial gases industry is slated for a strong growth over the next few years, thanks to a number of expansion projects in user industries. New capacities are planned in industries such as petrochemicals, steel, glass and food processing, which augurs well for the industrial gases industry. Additionally, gas application in the electronic sector has opened up new growth possibilities.
BOC India is the largest industrial gas manufacturer in India, which is currently investing in building storage and transport infrastructure for liquid and compressed gases. Gujarat Fluorochemicals is India’s largest manufacturer of refrigerant gases.
The Unsung Heroes
HOWEVER, Amajor chunk of the company’s revenues come from the sale of carbon credits, other chemicals and power. Refex Refrigerants is a new entrant in this space dealing in nonozone-depleting refrigerant gases. Bhagawati Gases, which was so far totally dependent on Hindustan Copper for selling oxygen, has now relocated one of its plants to supply oxygen to a steel manufacturer in Maharashtra.
INDUSTRIAL EXPLOSIVES
Industrial explosives are required in industries such as mining and infrastructure. Solar Explosives, Premiere Explosives and Keltech Energies are the leading players in this industry. Pune-based Deepak Fertilisers is also trying to give a strong push to its ammonium nitrate business, which is used as a commercial explosive. Increased investments in coal mining by Coal India, as well as private mines for power, steel and cement industries and road and other infrastructure projects, are driving demand for explosives.
CERAMICS
The ceramics industry mainly comprises floor and wall tiles and sanitary ware. The growth in this industry is being driven by the boom witnessed in India’s real estate sector. India’s real estate sector has been growing at over 30% per annum over the past few years, which has resulted in the booming demand growth for the ceramics industry. The growth in the hospitality industry and new commercial complexes, malls and multiplexes coming up in India also lend support to the growth prospects of this industry. Despite the current lull in the housing industry, there are a number of real estate projects —particularly integrated township projects —under implementation, which are expected to keep the demand for ceramics industry strong in the months to come. Several expansion projects are being executed by most players. Euro Ceramics had raised around Rs 92 crore through its IPO last year and has commissioned a plant for manufacturing calcarious tiles. Now, the company has embarked upon the next phase of investments with plans to spend Rs 575 crore. Hindustan Sanitaryware is setting up a container glass plant and has entered the retail business through its wholly-owned subsidiary.
SPECIALTY CAPITAL GOODS
Among capital goods companies,there are several which cater to a specific industry or have their own niche area. For example, Kabra Extrusion and Rajoo Engineers manufacture machines used by plastic product manufacturers. Manugraph Industries makes machinery for printing presses and Lokesh Machines specialises in CNC machines required in all the manufacturing plants.
Lokesh Machines had come out with an IPO in early ’06 to fund its expansion. Some of its expansion plans got pushed to the first half of ’08. Hence, the real benefits of this expansion will accrue over the coming quarters.
Kabra Extrusion Technik has been a major beneficiary of the booming demand for plastic pipes in India. The company manufactures extrusion machinery needed in manufacturing pipes, sheets and films from various polymers such as polyethylene (PE), polyvinyl chloride (PVC) or polypropylene (PP). The company, which is expanding its product portfolio, is trading at an attractive dividend yield
Manugraph Industries, which manufactures printing machinery, has emerged almost a debt-free company with healthy return on capital employed. Despite being fundamentally strong, lack of substantial growth opportunities have made the company languish with a price-to-earnings (P/E) multiple of 5.4. The dividend yield is attractive at 3.3%.
To wrap up things, there are interesting companies operating in highly niche areas, which are not too well-known in the market. Some of these industries have the tendency to fall out of fashion for long periods. However, a keen researcher may still hit upon a multi-bagger, if he acts in time. ramkrishna.kashelkar@timesgroup.com
2nd June 2008
Not Oil’s Lost
Ramkrishna Kashelkar takes a different view of the oil sector and finds that it offers interesting investment opportunities to retail investors
OIL IS all over the place. All talk everywhere trickles down to nothing else, but crude. Even as the man on the street frets over the snowball effect of rising prices, number-crunchers work at a hypnotic pace to figure out its next milestone. And governments across the world, especially those in the developing world, shudder over the fast-narrowing options at their disposal to deal with a catch-22 situation. While the current spike in crude oil prices is hurting the industry and the economy, there are sections of the industry, which are actually gaining from the same. The market capitalisation of Cairn India has risen 18% since the beginning of May ’08, against the 7.5% fall in the BSE Sensex during the same period. Cairn India, which is developing its oilfields in Rajasthan, is likely to gain from high crude oil prices. Similarly, there are quite a few companies operating in the petroleum value chain which are likely to benefit from rising crude prices. ETIG does a value check.
India’s largest crude oil producer, ONGC, has long suffered the burden of sharing subsidy and this reflects in its stock performance. However, the company is slated to benefit from the oil production of its subsidiary, ONGC Videsh (OVL), and its share in joint ventures in India, as it can sell this oil and gas at market prices. OVL contributed over 13% to ONGC’s total production of 60.8 million metric tonnes of oil & oil equivalent gas (O&OEG) during FY07, which is expected to go up to around 20% during FY08.
Smaller companies operating in the crude oil exploration and drilling business, such as Selan Exploration, Hindustan Oil Exploration and Assam Oil, will also benefit from rising crude prices.
However, important factors, including the rate of production, in-place reserves and the government’s share under the production sharing contract (PSC), must be studied before investing in these scrips.
As the prices of petroleum products such as petrol and diesel have gone up globally in line with the spurt in crude prices, the petroleum refining business continues to earn higher refining margins.
Gross refining margins (GRMs) represent the difference between the realisation through sale of petroleum products and the cost of crude oil required to produce them.
Strong refining margins will help standalone public sector refiners such as Mangalore Refinery and Petrochemicals (MRPL), Chennai Petroleum (CPCL) and Bongaigaon Refinery and Petrochemicals (BRPL). However, BRPL is currently facing problems of sourcing crude oil and is not able to utilise its capacities optimally. Similarly, the ratio for its merger with IndianOil (IOC) has already been fixed, which limits the returns available on the scrip.
Essar Oil has commenced commercial production at its refinery at Vadinar in Gujarat, which will start reflecting in its quarterly results from June ’08 onwards. While this will boost Essar Oil’s revenues substantially from the current levels, a similar spurt in interest and depreciation costs is also expected. Further, the refinery has a limited ability to process lower grades of crude oil and its profitability is expected to remain under pressure.
The 580,000-barrels per day (bpd) refinery being set up by Reliance Petroleum under the special economic zone (SEZ) at Jamnagar is expected to be commissioned before the end of ’08. This will not only bring in additional revenues and profits for RPL, but will also improve the bottomline of its parent company, Reliance Industries (RIL).
With the petroleum refining business remaining outside the subsidy-sharing mechanism of the government, a number of new projects are coming up in the country. BPCL’s 6-million tonne per annum (mtpa) refinery in Bina, Madhya Pradesh will get commissioned next year, while HPCL’s Bhatinda refinery in Punjab will go onstream in ’11. Considering the very high costs and delivery delays, two players, viz Cals Refineries and Nagarjuna Oil, have decided to set up refineries from second-hand equipment. Cals will set up a 5-mtpa refinery in Haldia in West Bengal, which is expected to be commissioned by ’10 and Nagarjuna Oil will set up a 6-mtpa refinery in Cuddalore in Tamil Nadu.
Even as crude prices soar to unprecedented levels, exploration activities worldwide are gathering pace. As they say, the only people who made money in the great Californian gold-rush were the suppliers of spades. Similarly, the firms helping oil companies in their exploration efforts are benefiting from the rush for crude. Over the past couple of years, these companies have been increasing their asset base, which is likely to pay off in the next couple of years.
Black Gold
ABAN OFFSHORE, which operates a fleet of 25 offshore drilling rigs required in petroleum exploration and production (E&P) activities in the deep seas, is growing fast. As the demand exceeds the availability of rigs, the charter rates for its vessels have more than doubled over the past couple of years.
Jindal Drilling, which acquired a 49% stake in Singapore-based Virtue Drilling, has posted stagnant profits over the past three quarters.
However, the company has contracts worth over Rs 2,500 crore and the arrival of its new rig in the next couple of months is likely to boost its future profitability. Seamec’s March ’08 financial performance suffered heavily as one of its clients in the US went bankrupt and two of its vessels remained dry-docked. However, things may take a turn for the better as its fourth vessel commissioned operations in March ’08. Dolphin Offshore has better prospects with three new vessels expected to join it by the end of ’08. Shiv-Vani Oil, which is India’s largest services provider for onshore exploration and production activities, is currently operating 32 rigs and expects to add another eight rigs by end ’08. The company is currently carrying orders worth Rs 3,200 crore, which are likely to go up further. Considering its FY08 turnover of Rs 410 crore, the growth opportunity is significant. Deep Industries, which originally provided solutions in natural gas compression and transmission, has now diversified into mainstream petroleum exploration. The company has obtained two marginal gas blocks and is developing them. At the same time, its charter hire business of compression equipment and work-over rigs is growing fast.
While the rise in crude oil prices has put one section of the industry under immense pressure, retail investors can find lucrative investment opportunities in other segments.
Besides the standalone refining and petroleum E&P companies, companies providing support to the E&P players also hold excellent growth prospects. ramkrishna.kashelkar@timesgroup.com
29th May 2008
Under-recoveries hit IOC’s bottomline
Ramkrishna Kashelkar/ ET Intelligence Group
INDIA’S largest petroleum refiner reported losses for the last quarter of FY08 as losses in marketing of petroleum products grew substantially. The company has to sell four products — petrol, diesel, LPG and kerosene — below cost despite rising crude oil prices. Thus its marketing division continues to suffer heavy under-recoveries. The last time IOC reported a quarterly net loss was way back in December 2005. Although the problem of under-recoveries has persisted since then, factors such as oil bonds, discounts from upstream companies, profits in refining or extraordinary gains had come to the rescue of the company to avoid slipping into the red.
However, this time under-recoveries were too high to be compensated by the other sources of income. The oil bonds received by IOC during the quarter ended March 2008 jumped 145% to Rs 7,536 crore, while the discounts received from ONGC, Oil India and Gail increased by 58% to Rs 5,376 crore. IOC’s refining business also put up a strong performance as the gross refining margins (GRMs) up by nearly 50% compared to last year and refinery throughput volumes rose by around 4%. Refining margins have improved thanks to higher proportion of sour and heavy grades of crude oil in the total mix.
The overall physical performance of the company was better than last year. IOC’s seven refineries put together reported over 100% capacity utilisation level. The sales grew 8% to 59.3 million tonnes. Exports were up 6% to 3.33 million tonnes. The utilisation of pipelines improved thanks to 11% growth in the pipeline throughput volumes to 57.12 million tonnes.
For the year ended March 2008, the company reported net profits of Rs 5,889.6 crore on a standalone basis thanks to oil bonds worth Rs 18,997 crore received during the year. On a consolidated basis, the performance of the company was slightly better thanks to the substantially improved performance of its subsidiaries such as Chennai Petroleum and Bongaigaon Refinery. On a consolidated basis, the PAT stood at Rs 7,912.7 crore on revenue of Rs 2,089,48 crore.
The company spent Rs 4,900 crore by way of capital expenditure during FY08, half of which went into petrochemicals. The company’s sales of linear alkyl benzene (LAB) spurted 34% to Rs 935 crore with sales volumes touching 1,360,00 tonne. Similarly, the company completed its first full year of operations of a purified terephthalic acid plant at Panipat with sales exceeding 3,75,000 tonnes, generating Rs 1,525 crore.
IOC currently has projects worth over Rs 50,000 crore under various stages of implementation. These include laying pipelines for transportation of crude as well as products, upgradation of refineries, capacity augmentation and a naphtha cracker at Panipat. The planned capex also includes a 15 million tonne per annum refinery at Paradip at a capex of over Rs 25,000 crore, which is expected to be commissioned by 2012. At present, the company is losing around Rs 16.3 per litre of petrol, Rs 23.5 per litre of diesel, Rs 28.7 per litre of kerosene and Rs 306 per cylinder of LPG sold to domestic consumers. This has resulted in worsening its profits as well as cash position. Hence, Indian Oil’s current results give cues of worse results from other oil PSUs like HPCL and BPCL.
