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I O C LQ2 FY17

I O C L Q2 FY17 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹135P/E: 5.7Market Cap: ₹1.9L CrSector: Petroleum Products

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3
  • Marketing sales and volumes have registered an increase compared to the previous period of six months, indicating growth potential.
  • Marketing EBITDA (excluding inventory impact) for H1 increased from Rs 3100 Crores last year to Rs 3600 Crores this year, showing healthy growth.
  • Paradip refinery utilization is expected to exceed 90% by February-March 2017, which would contribute to normalized and potentially higher GRM.
  • Paradip’s throughput is projected to increase from 1.7 million tonnes in the quarter to 3.7-4 million tonnes by Q4.
  • Bulk diesel and ATF volumes can fluctuate due to tender-based bulk consumers; retail segment volumes are stable.
  • Petrochemical business is growing strongly, with profits up by Rs 868 Crores compared to the previous year.
  • Capital expenditure plans include significant investment in Paradip expansion, petrochemicals, and Euro-VI/BS-VI projects boosting capacity and future volumes.

See what I O C L management said on margin guidance — free account, 30 seconds.

Fundraise plans

Yes
- No explicit mention of current or future fundraising through new debt or equity in the provided transcript. - Borrowings have reduced from Rs 53,404 Crores in March to Rs 41,885 Crores in September, further down to around Rs 37,600 Crores as of October. - Financing costs have also declined accordingly. - Capital expenditure (Capex) guidance shows a planned increase to Rs 19,000 Crores in the current year due to the Russian acquisition. - Large Capex planned over 5-7 years (Rs 175,000 to 183,000 Crores), but funding sources or fundraising details are not specified. - The company mentioned having structured due diligence in place before project approvals, suggesting careful financial management. Hence, no direct announcement of new fundraising via debt or equity as per the Q2 FY2017 earnings call.

See what I O C L management said on order book — free account, 30 seconds.

Capex plans

Yes
  • Current year capex increased from Rs 15,000 Crores to Rs 19,000 Crores due to Russian acquisition.
  • Segment-wise breakup for current year capex:
  • - Refineries: Rs 3,400 Crores
  • - Pipelines: Rs 1,300 Crores
  • - Marketing: Rs 4,800 Crores
  • - Exploration & Production (E&P): Rs 6,000+ Crores (increased due to Russian acquisition)
  • - Petrochemicals: Rs 1,000 Crores
  • - Alternate energy and gas schemes make up the balance.
  • Next 5-7 years planned capex target: Rs 175,000 to 183,000 Crores.
  • Planned segment-wise 5-7 year capex allocation:
  • - Refineries: Rs 50,000 Crores
  • - Pipelines: Rs 22,000 Crores
  • - Marketing: Rs 40,000 Crores
  • - E&P: Rs 30,000 Crores
  • - Petrochemicals: Rs 29,000 Crores
  • - Alternate energy, gas schemes, R&D, etc.
  • Paradip refinery capital spending includes Rs 3,000 Crores for a petrochemical project (polypropylene) to be commissioned by 2018, and around Rs 1,000 Crores for Euro-VI/BS-VI quality improvement.
  • Additional Paradip expansion projects are at decision stage.

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Margin guidance

Category 3
  • Paradip refinery is expected to generate normal Gross Refining Margin (GRM) once it operates above 90% capacity by Feb-Mar 2017, positively impacting earnings.
  • Capital expenditure planned: ~Rs 19,000 Crores for current year, including Rs 3,000 Crores on Paradip petrochemical project (commission by 2018), Rs 1,000 Crores on Euro-VI/BS-VI emission upgrade, and acquisition-related spend on Russian fields.
  • Long-term capex target: Rs 175,000-183,000 Crores over 5-7 years across refineries (Rs 50,000 Cr), pipelines (Rs 22,000 Cr), marketing (Rs 40,000 Cr), E&P (Rs 30,000 Cr), petrochemicals (Rs 29,000 Cr), alternate energy, and R&D.
  • Petrochemical business profit increased ~35% YoY, indicating robust growth potential.
  • Reduction in demurrage costs (~Rs 500 Crores per quarter) and foreign exchange gains (~Rs 1,100 Crores) have supported profitability on a one-time basis.
  • Margins in marketing and lubricants stable; bulk diesel volumes fluctuate with tender wins impacting near-term earnings volatility.
  • Employee pay scale revision expected in early 2017, potential impact on costs.

Order book

  • Indian Oil Corporation Limited has plans to spend approximately Rs 175,000 to Rs 183,000 Crores over the next five to seven years.
  • Segment-wise tentative allocation:
  • - Refineries: around Rs 50,000 Crores
  • - Pipelines: around Rs 22,000 Crores
  • - Marketing: about Rs 40,000 Crores
  • - Exploration & Production (E&P): approximately Rs 30,000 Crores (earmarked)
  • - Petrochemicals: around Rs 29,000 Crores
  • - Alternate energy, gas schemes, and R&D form remaining allocations.
  • Projects reported are on the table but decisions will be based on feasibility and viability evaluations conducted through a structured due diligence process.
  • The company aims to balance diversification with strengthening its core business through this ambitious capex and project pipeline.

How does I O C L rank vs peers in Petroleum Products?

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