Indian Oil Q4FY24 results: Net profit shrinks 50% to Rs 5,149 crore

Annual net profit up 268% to Rs 43,161 crore, helped by Russian discounts

During the fourth quarter of FY24 (January-March 2024), state-run Indian Oil Corporation (IOCL) saw its consolidated net profit fall 49.3 percent to Rs 5,149 crore from Rs 10,290 crore in Q4 of FY23.

On a sequential basis, net profit slipped 43 per cent from Rs 9,030 crore.

The sharp fall in net profit during Q4 may be due to lower gross marketing margins on petrol and diesel.

Margins (for petrol and diesel) had reduced to an average of Rs 8 and Rs 3.4 per litre, respectively, during the quarter, according to a note by Motilal Oswal.

On the other hand, a pump price cut of Rs 2 since March 15 may have reduced retail margins as well.

Despite the fall in profits during the latest quarter, the oil marketing company (OMC) saw its consolidated annual net profit grow 268 per cent to Rs 43,161.15 crore in FY24 from Rs 11,704.26 crore in FY23.

Continuous discounts on an increasing volume of Russian crude supplies are widely understood to be behind this.

In Q4, the company's revenue from operations fell by 2.6 per cent to Rs 1.98 trillion, compared to Rs 2.03 trillion in Q4 of FY23.

This drop in revenue is primarily attributed to lower earnings from the largest segment of petroleum products, which dipped 4.13 per cent to Rs 2.11 trillion from Rs 2.2 trillion in the same quarter of the preceding year.

With its 10 refineries accounting for a cumulative 80 million metric tonnes per annum (MMTPA) capacity, IOC controls nearly 33 per cent of India's refining capacity.

Sales from the petrochemicals business, however, rose nearly 10 per cent to Rs 6,908.5 crore from Rs 6,281.66 crore in Q4 of FY23.

In contrast, the quarter under review saw a nearly 21 per cent rise in revenue from other business activities to Rs 10,640.09 crore from Rs 8,798.86 crore during the same quarter of the previous year.

The company's board declared a dividend of Rs 7 per share of face value Rs 10, the company said in an exchange filing.

On the marketing front, IOC achieved domestic product sales of 23.737 million metric tonnes (MMT) during Q4, while export sales stood at 1.54 MMT in Q4.

The company's shares fell 4.41 per cent on Tuesday, closing at Rs 168.95 on the NSE.

Lower refining margins

For FY24, IOC reported a weaker average gross refining margin (GRM) — the revenue refiners accrue from transforming each barrel of crude oil into refined fuel products.

IOC said the average GRM stood at $12.05 per barrel for FY24.

This was 38.2 per cent lower than the $19.52 per barrel recovered in the same period of the previous financial year.

“The core GRM or the current price GRM for FY24 after offsetting inventory loss or gain comes to $11.44 per barrel,” it said.

Lower GRMs have become a fixture for OMCs over the past few quarters.

In 2022, disruptions in supply of Russian oil coupled with a decrease in petroleum product exports from China led to a reduction in the supply of refined products. This prompted GRMs to skyrocket to record highs.

Consequently, earnings for Indian refiners had seen an upswing.

However, while Moscow has kept a check on supplies to the international market in 2023, GRMs for Indian refiners have remained at lower levels. Indian OMCs continued to secure oil from Russia at a discounted price.

But as average levels of discounts on Russian crude have reduced to less than $4 per barrel in FY24, GRMs have slid.