IOCL Q1 result: Net profit falls 75% to Rs 3,528 cr on low refining margins

Lower gross refining margins, higher expenses pulled down revenue to Rs. 2.19 Trillion

In the first quarter of FY25 (April-June), state-run Indian Oil Corporation Ltd (IOCL) saw its consolidated net profit steeply fall 75 per cent to Rs 3,528 crore, down from the Rs 14,436 crore net profit registered in Q1 FY24. On a sequential basis, the net profit exhibited a per cent decrease from Rs 5,148.8 crore recorded in Q4 FY24.

The sharp reduction in net profit in Q1 came due to lower average gross refining margins (GRMs) – the revenue refiners accrue from transforming each barrel of crude oil into refined fuel products. IOCL reported that the average GRM stood at $6.39 per barrel in Q1. This was 23.3 per cent lower than the $8.34 per barrel recovered in the same period of the previous financial year.

 

The company's revenue from operations did not shrink much in the latest quarter, reducing by 2.4 per cent to Rs 2.19 trillion, compared to Rs 2.25 trillion in Q1 FY24. However, IOCL's expenses rose by Rs 9,196.37 crore in Q1 to Rs 2.16 trillion. The cost of materials consumed, up by 10.5 per cent, and purchases of stock in trade, higher by 7.5 per cent, were the two biggest expenses.

This drop in revenue is primarily attributed to lower earnings from the largest segment of petroleum products, which dipped 3.6 per cent to Rs 2.03 trillion, down from Rs 2.11 trillion in the same quarter of the previous year. With its 10 refineries accounting for a cumulative 80 million metric tonnes per annum (MMTPA) capacity, IOCL controls nearly 33 per cent of India's refining capacity.

Sales from the petrochemicals business, however, rose nearly 0.9 per cent to Rs 6,789.4 crore, up from Rs 6,728.3 crore in Q1 FY24. The quarter under review also saw nearly 36.4 per cent growth in revenue from other business activities to Rs 10,690 crore, from Rs 7,839.1 crore during the same quarter of the previous year.

On the marketing front, IOCL achieved domestic product sales of 24.06 million metric tonnes (MMT) during Q1, while export sales stood at 1.18 MMT in Q1.

The company's shares rose 1.6 per cent to Rs 183.4 on Tuesday, part of a wider rally in oil stocks.

 

Lower refining margins

"The core GRM or the current price GRM for FY24 after offsetting inventory loss or gain comes to $2.84 per barrel," it said. Lower GRMs have become a fixture for OMCs over the past few quarters.

In 2022, disruptions in the supply of Russian oil coupled with a decrease in petroleum product exports from China led to a reduction in the supply of refined products, prompting 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.