Despite a 29 per cent year-on-year growth in net sales to Rs 92,523 crore, downstream oil-major Indian Oil reported a 10 per cent increase in net loss to Rs 3,719 crore in the June 2011 quarter. This was primarily due to an increase in the company's net under-realisation accompanied by a sharp rise in interest cost.
The company's share of under-realization increased 4.5 per cent to Rs 7,673 crore. This was despite an almost doubling of product discounts (Rs 7,932 crore) received from upstream companies and the government compensating Rs 8,201 crore in the June 2011 quarter (nil in Apr-June 2010).
Spiky crude
A sharp spike in gross under-recoveries due to galloping crude oil prices led to the increase in the company's burden. Brent oil averaged $117 a barrel in the June 2011 quarter, compared with $79 in the year-ago period. Going forward, the company may see some respite on the under-recovery front, thanks to the rise in prices of petroleum products in the last week of June. Also, the recent moderation in the price of crude oil, if it sustains, should aid Indian Oil.
That the company had to resort to more borrowing is reflected in the steep 80 per cent increase in interest cost to Rs 1,038 crore. Along with increasing under-recoveries, the time-lag in receiving compensation from the government would have contributed to this.
The company's product sales during the quarter increased by 5.2 per cent year-on-year, to 19.26 million tonnes, while its refineries' throughput grew 3.8 per cent to 14.31 m t.
IOC also saw an increase in its June quarter gross refining margins to $4.71 from $3 (in the corresponding quarter last year) a barrel. But, this was lower than the $7.85 a barrel margin that IOC made during the fourth quarter (March) of fiscal 2011.