State-owned Indian Oil Corp (IOC) Friday reported a 17 per cent rise in its fourth-quarter net profit as inventory and foreign exchange gains neutralised lower refinery margins.
The net profit of Rs 6,099.27 crore, or Rs 6.46 per share, in January-March 2019 was 16.88 per cent higher than Rs 5,218.10 crore, or Rs 5.51 per share, reported in the year-ago period, IOC Chairman Sanjiv Singh told reporters here.
"The variation is mainly on account of inventory gains and product cracks," he said.
As international oil prices fluctuated, the company accounted for inventory gains.
IOC had an inventory gain of Rs 2,655 crore in January-March 2019 as compared to an inventory gain of Rs 4,172 crore in the corresponding period of the previous fiscal. Also, there was an foreign exchange gain of Rs 837 crore as compared to a forex loss of Rs 676 crore a year back.
Inventory gain occurs when a company buys raw material (crude oil in case of a refiner like IOC) at a particular rate from the international market but by the time it is able to transport it to its refineries and convert it into fuel, rates have gone up.
Since refinery-gate prices are fixed at par with prevailing benchmark international rates, a gain is booked. Inventory loss occurs if the reverse happens. ?