Post on 03-Apr-2018
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INDIAN
OIL
CORPORATION
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INDUSTRY OVERVIEW
Indian Oil& Gas Sector US$ 110 billion industry
6th largest consumer of petroleum products and expected to be at 4thposition by 2010 (source: IBEF)
Indian crude demand 130 MMTPA
30% Domestic70% Imported
19 Refineries Capacity of 177 MMTPA
Refining capacity expansion planned over 5 yrs. Is over 60%
Approx. 7 lakh people employed in the oil & gas industry
1.58 lakh kiloleters of fuel dispensed from retail outlets every dayamounting
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COMPANY
BACKGROUND
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COMPANYBACKGROUNDIndian Oil Corporation at a Glance
Ticker IOC
Number of Shares 209934345
Promoters Holding 80.50%
Market Capitalization (Rs.In crores) Rs.48135.10
Employees 31945
Refinery Capacity (in MMTPA) 60.20
Retail Outlet (including IBP) over 32,500
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Shareholders Pattern
1%
6%
9%
3%
81%
Promoter Institution Bdy Corporate
Individuals Others
Refining Market Share
15%
9%7%
22%
7%40%
IOCL BPCL HPCL ONGC RIL ESSAR
Market Share Of Major Players
3%
49%
21%
9%18%
IOCL BPCL HPCL RIL OTHERS
Market Share in Pipeline
47% 7%
16%
30%
IOC L ONGC HPC L BPC L
COMPANYBACKGROUND
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COMPANY BACKGROUND
IOCL is a public sector undertaking formed in1964 through the merger of Indian Oil CompanyLtd. and Indian Refineries Ltd.
18
th
largest petroleum company in the world. Major supplier to Defense forces, Railways,
STUs(army-96%; navy-100%; Airforce-90%; STUs-87%; Railways-84%).
Only oil company to operate in every part ofIndia.
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BUSINESS
ANALYSIS
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ONLY COMPANY TO HAVE PRESENCE IN HIGH
CONSUMPTION NORTH AREA
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UBIQUITOUS PRESENCE
Marketing:Market shareOf 45%; 55% of industry
infrastructure
Petrochemicals:
Operational Lab &Px/PTA Plants
E&P: Forays In India& Overseas
Gas: Sourcing &marketing
Refining: 10 Refineries;Refining market share of 40%
Pipeline: 9273 kms pipeline(crude & product)
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PRODUCT PROFILE
CRUDE
FURNACE
VACCUM
UNIT
Butane & Lighter
Naphta
Gasoline
Kerosene
Light Gas Oil
Heavy Gas Oil
Residue Fuel Oil
SGU/LMU
NHT/CCR
KMU/DHDS
DHDS
FCCU
VSU
90-220F
220-315F
315-450F
450-650F
650-800F
800+F
DISTILLATION
TOWER
(Crude Unit)
LPG 3.70%
MS- 17.40%
ATF/SKO-4.50%
HSD-40.70%
BITUMEN-1%
FO-32.70%
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BUSINESSMODEL
ALUEPROPOSITION: offerpetroleum products likepetrol, high speed diesel,naphta & lubricant.
COSTSTRUCTURE :rawmaterial is the majorcomponent of the cost italmost incurred 81% oftotal cost followed byinterest and staff cost.
CUSTOMERRELATIONSHIP;company maintain longterm & cordialrelationship with hisclientsCUSTOMERSEGMENTS:fuels to mostof the sectori.e.automobileaviation etc.
ACTIVITYCONFIGURATION; hightech infrastructure withon line automatic qualitycontrol ensures qualitycheck
CORECAPABILITIES:strong and wellestablishedmarketing &distributionnetwork,favorablecoverage ratiosprovides supportto its creditprofile.
PARTNERNETWORKMajor partnersrailway,automobilesectorinfrastructure
REVENUESTREAMS; companyrevenue comes fromwide variety ofpetroleum productsand special petroleumproducts.
CUSTOMEROFFER
FINANCE
DISTRIBUTIONCHANNELS; companyhas strong nationwidedistribution networkwith 88329 retailoutlets.
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STRATEGIES TO FACE DOWNTURN
Entering into new business segment of city gas distribution
Able to earn revenue through other business activity Planning to invest aggressively in petrochemical sector
Initiating research in new frontiers (such as residue gasification coal-to-liquid, gas-to-liquid, alternative fuels, synthetic lubes, nano-technology,etc.)
Planning to enter in retail business through opening retailoutlets at prime location petrol pumps
Investing in oil bonds to decrease debt level
180 new & cost effective product formulations developed
Indalin+ technology for conversion of Naphtha to LPG/MS Creating Unique Selling Points in all customer segments
Expanding the non-fuel business to improve cos. bottom line
Marketing of alternate fuels and maintaining productdifferentation
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PERFORMANCEANALYSIS
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REFINING: ANNUAL OPERATING HIGHLIGHTS
Gross Refining Margins $/bbl
5.3
6.2
4.6 4.2
9.02
3.37
0
1
2
3
4
5
6
7
8
9
10
FY04
FY05
FY06
FY07
FY08
Apr-
Dec08
$
Capacity Utilization
104100
85
90
95
100
105
FY08 FY09
%
Refinery Throughput
47.4
62.3
0102030405060
70
FY08 FY09
MMT
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OPERATIONAL PERFORMANCE
Sales & Sales Growth
0
200
400
600
800
JAS
07
OND
07
JFM
08
AMJ
08
JAS
08
OND
08
Rsbn
-100102030405060
%
Sales Sales Growth
Trend of PBDIT & OPM
-100
-50
0
50
100
150
200
JAS07
OND07
JFM08
AMJ08
JAS08
OND08
Rsbn
-10
-5
0
5
10
1520
25
30
35
%
PBDIT OPM
Fall in sales due to decrease in
domestic demand as well as exportduring Oct 08 to Mar 09
Due to increased crude prices and
increasing under recovery,
company has to reduce production
Lowest GRM in previous 5 yrs
leads to decrease in OPM
High cost of fund keeps pressure
on operating profit
Non-revision of selling price also
leads to fall in operating profit
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FINANCIAL PERFORMANCECost Structure as % of Sales
0
10
2030
40
50
60
RM Traded
Goods
Staff Depn Interest Other Tax
%
2007-08 2008-09
PAT & NPM
-80
-60
-40
-20
0
20
40
60
JA S0 7 OND0 7 JFM 0 8 A M J0 8 JA S0 8 OND0 8
Rs.
(in
bn)
-10
-8
-6
-4
-2
02
4
6
%
PAT(LHS) NPM (RHS)
D/E Ratio
0.7
0.75
0.8
0.85
0.9
0.95
2005-06 2006-07 2007-08`
Cost as a % of sales has increased
due to high material cost because of
high crude prices and increase inother expenses
PAT has declined from the previous
year due to heavy increase in under
recovery during 1st half of FY09 and
so it keeps pressure on NPM
Trend of Dividend Payout
0
20
40
60
80
100
120
140
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
%
Continuous dividend payment policy
taken by the company
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PROFITABILITY RATIOS
FY05 FY06 FY07 FY08 FY09
OPM
NPM
ROAvg.NW
ROAvg.CE
5.32
0.1314.8315.7114.4918.47
-13.9419.5420.5916.1819.62
4.46 4.97 4.56 -3.40
2.78 3.43 2.78 0.023.48
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CAPITAL MARKET PERFORMANCE
Under performed during half of FY09 because of high crude
prices Sensex falls 40%, O&G falls by 33% whereas IOCL has fallen
by 13%. Beta of stock is 0.60.
Relative Strength Index
0
20
40
60
80
100
120
1April
2008
25April
2008
21May
2008
12June
2008
4July
2008
28July
2008
20August
2008
12
September
2008
7October
2008
31October
2008
25
November
200819
December
2008
14January
2009
6February
2009
3March
2009
27March
2009
Sensex O&G IOCL
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WAY AHEAD
Governmental action in formulating a viable market related pricing policy
Rationalization of duties and taxesmove towards GST regime
Planned set up off retail outlets to justify long term viability-planned township.
Evaluate options for retail outlets as receiving and storage points instead ofonly sales pointsWarehousing facilities, Receipt points for NFRs etc.
Generate additional revenue and margin streams from Alternate Fuels CNG,
Auto-LPG and Bio-Fuel
Companys revenue will grow after operation started at Panipat refinery
Company is diversifying its business through entering into city gas distribution
segment
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ISSUES AND CONCERNS
Volatility in crude oil prices.
Government controlled prices.
Rupee Fluctuation.
Lack of necessary infrastructure.
Depleting fuel resources.
Rising bad debts.
Delay in projects.
Cost of oil rigging is high.
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CHALLENGES FOR COMPANY
Company is considering entering into other energy sub-sectors to
compliment its own line of business.
Optimization of refining processes.
Logistics & supply chain management.
Timely execution and safe commissioning of project.
Consolidation of retail and direct consumer businesses through better
offerings than competitors.
Retention of skilled manpower.
Enhancing profitability.
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REFINERY BUSINESS: Set TO DeliverStrong Value
Strategic Location, Proximity
To Materials, Access to End
Markets
Refining Industry Outlook
Remains Strong
India Emerging as a Global
Refining Hub
Leverage Existing Project
Execution Capabilities and
Infrastructure
Market Leader in Downstream
Economies of scale Benefits
High Complexity, Cost
Competitiveness,
Product Flexibility and High
GRM Potential
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