State-owned Indian Oil Corporation Ltd (IOC) has reported a staggering 98.6% drop in net profit for the July-September quarter of the 2024-25 fiscal year. The company’s standalone net profit for this period stood at ₹180.01 crore, a sharp decline from ₹12,967.32 crore in the same quarter last year, and down from ₹2,643.18 crore in the previous quarter (April-June 2024).
Key Factors Behind the Decline
- Falling Refinery Margins: The decrease in profitability is attributed to shrinking refinery margins. IOC earned only USD 4.08 per barrel from refining crude oil into fuels like petrol and diesel, a significant drop from USD 13.12 per barrel in the previous year.
- Under-recoveries on LPG: The company reported substantial under-recoveries from selling domestic cooking gas (LPG) at government-controlled prices, which were lower than the actual cost. For the six months ending September 30, IOC recorded LPG under-recoveries amounting to ₹8,870.11 crore.
- Declining Pre-tax Earnings: Pre-tax earnings from downstream fuel retailing plummeted to ₹10.03 crore, compared to ₹17,755.95 crore during the same period last year.
- Revenue Drop: IOC’s revenue from operations fell to ₹1.95 lakh crore in the July-September quarter, down from ₹2.02 lakh crore a year earlier, largely due to softening international oil prices.
- Reduced Sales Volume: IOC sold 21.931 million tonnes of petroleum products in Q2, slightly lower than the 21.941 million tonnes sold last year and down from 24.063 million tonnes in the previous quarter. Crude oil processing at its refineries also decreased, from 17.772 million tonnes in July-September 2023 to 16.738 million tonnes in the latest quarter.
Historical Context
Last year, IOC and other state-owned fuel retailers like Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) benefited from holding petrol and diesel prices steady, despite a drop in crude oil costs. However, these gains were eroded after prices were cut by ₹2 per litre just before the announcement of general elections, further impacting profitability.
The profitability of IOC has been adversely affected as product cracks—the difference between the price of crude oil and the final product—shrank from the highs seen in the 2022-23 fiscal year.
Market Summary (as of October 28, 2024)
- Share Price: ₹145.74 (−0.57, 0.39%)
- Opening Price: ₹148.60
- High: ₹149.73
- Low: ₹145.00
- Market Cap: ₹2.08 lakh crore
- P/E Ratio: 6.51
- Dividend Yield: 8.23%
- 52-week High: ₹196.80
- 52-week Low: ₹85.50
The significant decline in IOC’s profit reflects broader challenges faced by the company amid falling refinery margins and external market pressures. As the landscape for oil and gas continues to evolve, IOC’s strategies in navigating these challenges will be critical for future performance.
Disclaimer: This information is for educational purposes only and does not constitute financial advice. Please consult your financial advisor before making any investment decisions
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