IBP set to gain from IOC merger

IBP is set to gain the most from its merger with Indian Oil Corporation (IOC) by using the latter's infrastructure as well as product reach. The retail points of both the companies can be assured of continuous supplies on a sustained basis.

The merger of IBP with IOC would result in optimisation of resources for meeting competition through a shared infrastructure and thus eliminating duplication of efforts, said N G Kannan, director (marketing), IndianOil, who recently took over as managing director of IBP.

Sharing of product knowledge, human resources, systems and procedures including launching joint marketing strategies and branding initiatives would result in positive synergies at most optimum costs. The resultant enhancement of intellectual capital would enhance the competitiveness of both organizations.

The other crucial benefits include savings in inter-company transaction taxes, improvements in funds flow, cost benefits through infrastructure rationalising and efficient utilisation of combined manpower.

The procurement processes of IOC and IBP in retail and LPG can also be combined and leveraged for superior negotiations and economies of scale resulting in substantial discounts from vendors, "which automatically translate into higher productivity and profitability" added Kannan in a media statement.

"The merger of IndianOil and IBP will be a smooth transition since both companies have shared values. The boom in the automotive sector, high growth in GDP and the ambitious National Highway upgradation programme being implemented are all opportunities that we are best placed to expand on at the strategic level to create entry barriers," Kannan said.

The combined retail network presence of IOC and IBP is over 12,000. Traditionally, IBP has had a strong presence in the retail segment especially in metros and urban areas while IndianOil has a formidable presence in the consumer segment as well as the high volume, high growth highway retail sector.

This synergy in the retail sector, therefore, will ensure an invincible position for the IOC-IBP combine in the country. The IOC-IBP combine has shown an improvement of 0.9% in retail Petrol sales and 0.5% in retail Diesel sales, over last year.

Its market share is expected to be around 56%, which will further enhance the supremacy of this entity in the Indian Oil Industry.