Friday, August 10, 2012

INDIAN OIL: Losses to Take the Sheen Off Navratna Co


The country’s biggest petro-retailer, Indian Oil, posted its largest-ever quarterly loss in the June 2012 quarter on heavy under-recoveries, inventory as well as forex losses. This loss has also wiped out nearly 40% of the company’s net worth at the end of FY12. If things don’t change fast, the Navratna PSU will end up as a sick company with negative net worth is another two quarters.
Indian Oil’s net loss for the June quarter was an unprecedented . 22,451 crore — a six-fold increase from the year-ago level of losses. This erased all the profits it had made over the last three years — . 4,226 crore in FY12, . 7,831 crore in FY11 and 
. 10,713 crore in FY10.
The company lost over . 17,485 crore by selling diesel, LPG and kerosene at government-regulated prices that are way below the cost, becoming the biggest factor for the company’s huge net loss in the June quarter. The loss could have been higher had it not been for the discounts of . 8,041 crore that the upstream companies like ONGC, Oil India and Gail extended. The fall in crude oil prices towards end June might have helped the company reduce its under-recoveries, but they knocked . 4,062 crore off its inventory value, which was worth $7.54 per barrel. Since this was significantly higher than the company’s gross refining margins (GRM) for the quarter, it posted a negative GRM of $4.81 per barrel. On top of 
these two mega-losses, the company also took a . 3,187-crore hit on foreign exchange as rupee depreciated over 11% through the quarter.

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