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Archana Chaudhary

MUMBAI, May 27

IBP Ltd is heading to the countryside in search of new markets to protect and expand its 6 per cent share in the Indian oil retailing business. Majority of the 500 retail outlets — the highest commissioning by any company last year — that IBP opened last year were in the interiors.

Being a retail-only company, IBP perhaps has more reasons to be fighting fit when the private players with deep pockets walk into the arena next year. The company, which had only 1,549 retail outlets (ROs) until last year, expanded its network to 2,079 ROs by the end of it.

"We plan to have more than 3,500 retail outlets within the next two to three years. Last year we commissioned the highest number of ROs. This year, we plan to put up a similar number," Mr R.S. Guha, Director (Marketing), IBP, told Business Line.

The idea is to corner prime locations in the interiors with investments as low as Rs 70 lakh per outlet. The strategy is in stark contrast to most oil companies, which are targeting semi-urban centres and national highways where the cost per outlet could be Rs 1.5-2 crore or more.

IBP plans to consciously spread out to remote locations even if it just installs a diesel and petrol dispenser with an IBP sign. Also, the strategy is to lease out land for 30 years instead of buying it, Mr Guha said. "We plan to establish our presence in untapped markets. Retailing in metros is at a saturation point," he said.

According to analysts, the strategy suits IBP's owner Indian Oil Corporation (IOC). "IOC already has a presence in the metros and A-class sites across the country. If its subsidiary corners prime locations in the growing interiors, so much the better," said a senior oil sector analyst.

Also, retailing diesel is IBP's strength. It has a 187-kl per pump per day diesel throughput, considered high by industry standards. "We see tremendous potential in the interiors. IBP has been a strong diesel seller in the past with good representation along highways. Now we plan to focus on locations which are still 5 km to 10 km away from petrol pumps," Mr Guha said. "The investments allotted to last year's expansion plan was roughly Rs 250-300 crore. We haven't spent the whole sum," he added.

IBP has also restructured its internal functioning. "We had only four regions and 10 divisions till about three years ago. We increased that to five regions and 24 divisions last year. Today this number stands at 33 divisions," Mr Guha said.

Although analysts are sceptical about IBP's plans to move away from the urban trade hubs considering sale could be low, pulling down per pump throughput, IBP officials are optimistic.

"We were stagnant at 1,500 outlets for the past few years. We crossed the 2,000-mark within a year. Expect a burst in the number of IBP retail outlets by the end of fiscal year 2004-05," a senior official said.

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