New Delhi: Daily fuel price revision and unusually lower crude prices have failed to prevent Indian Oil Corporation Limited from posting a loss. IOCL in its annual statement announced on Wednesday revealed a loss for its fourth quarter.
The company posted a net Loss of Rs 8,565.54 crores for the fourth quarter of fiscal year 2019-20. In the corresponding period of last fiscal it posted a profit of Rs 6,003.96 crores.
Net consolidated loss for the full fiscal year was reported at Rs 1,876.32 crore as against Rs 17,273.85 crore in the previous year.
The statement included several headers responsible for the deepening loss. The most acute fall was ascribed to a correction in international crude prices. The slip in crude prices resulted in a loss of Rs 11,304.64 crores.
The inventory loss in the fourth quarter was estimated at Rs 6,855.35 crores, however a longer timeframe was chosen. IOCL in a note said, "As a one-time measure, a longer time period is considered for better estimation of NRV... As a result of considering a longer time period, the write down in valuation of inventories increased to Rs 11,304.64 crore," it said in a note.
Crude prices in 2020 skid by 41 percent. Retail prices are benchmarked to raw materials including crude oil. Hence, a lower crude price results in lower inventory gains. A higher crude results in appropriate gains in inventory.
Other headers include Rs 6,547.34 crores towards loss incurred in joint ventures and other associates. IOCL also lost Rs 4,1453.53 crores on foreign exchange fluctuations.
The total consolidated income from operations for the quarter in comparison went down 3.11 per cent to Rs 1.43 lakh crore. Total expenses during the period increased 7.65 percent to Rs 1.5 lakh crores.
Shares of IOCL were down at 2.24 percent to Rs 85.05 per share on the Bombay Stock Exchange. Analysts at HDFC Securities have advised adding on to IOCL shares forecasting share price to touch Rs 94 owing to an "expected recovery in demand for petroleum products and subsequently, refining margins."
"We raise our standalone FY21/22 EPS estimate to INR 4.4/10.3 vs. (0.4)/9.2 owing to the change in tax rate to 25.2%. We raise our Core GRM estimates by USD 1.4/0 per barrel to USD 3.4/3.9 for FY21/22," read a note written by authors Harshad Katkar and Nilesh Ghuge.