Indian Oil Corporation Limited (IOC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Indian Oil Corporation Limited Q1 FY '27 Earnings Conference Call hosted by Antique Stockbroking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vardaraj, Antique Stockbroking Limited. Thank you, and over to you, sir.

Thank you, Rabin. Good afternoon, ladies and gentlemen. It's a pleasure to welcome all the participants to the first quarter FY '27 results call of Indian Oil Corporation. We have with us Mr. Anuj Jain, Director of Finance; Mr. Nitin Kumar, EV Corporate Finance and Treasury; Mr. Pramod Jain, CGM, Treasury. Without much ado, I would like to hand over the floor to Mr. Anuj Jain for his opening remarks.

Thank you, Mr. Varatharajan. Dear investors and analysts, a very good afternoon to all of you. I take this opportunity to welcome all of you to the conference call organized by us post announcement of the first quarter results of financial year 2027. I thank each one of you for joining the call. I trust you have had an opportunity to review the results we have posted on our website, exchanges and the updates that have been shared with you. In today's call, we would like to walk you through our performance for the quarter gone by, provide some insights on the broader macroeconomic context and also share with you the strategic initiatives we are pursuing to strengthen our position as India's largest energy company. Before I move to the operational and financial highlights, let me briefly touch upon the evolving geopolitical developments and the implications for the global energy markets. Since the last call, the global energy landscape has continued to evolve at a rapid pace, while the announcement offers 60 days to between the United States and Iran in mid-June, shown size of moderation in concerns over supply disruption. The overall environment remained marked by geopolitical uncertainty involving tensions and the reconfiguration of global trade and energy rows. Recent renewed military acquisitions in the Middle East have once again towards the security of critical maritime energy corridors, particularly the state of almost and the Red Sea into sharp focus reminding us that volatility remains an inherent feature of the group energy ecosystem. Energy security now depends not only on resource availability, but also on resilient supply chains diversified sourcing and operational agility in a complex global environment. I'm pleased to inform that Indian Oil has once again demonstrated the strengths by ensuring uninterrupted energy supplies across the country with reliability and resilience. Indian Oil continues importing secure, reliable economically competitive crude oil grades from diverse countries, while managing challenges of high market volatility, logistics challenges in terms of ships, insurance, rate costs, among other things. Net disruption, we diversified our sourcing by increasing imports from other geographies like Russia, Venezia, Brazil and even from African countries, thereby ensuring continuity of crude oil imports to maintain our brand refinery operations. The spot imports for the quarter stand at about 84% against 51% in the last year. As regards to the operational performance for Q1 financial year 2027 in -- we reported a net loss of INR 2,661 crores compared with the after tax of INR 1,137 crores in the preceding quarter, that is Quarter 4 of financial year '25-'26 and profit after tax of INR 689 crores in the corresponding quarter of financial year '25-'26. So reported or need to be viewed in the context of heightened geopolitical tensions and ongoing confess, which led to significant wet in the international food and product prices and exerted considerable pressure on marketing margins on retail fuel, particularly impacting the quarter's profitability. Revenue from operations during the quarter stood at [ INR 272 ] crores against INR 2,855 crores in the immediately preceding quarter of this year. The sequential increase in revenue was mainly driven by higher product prices. The revenue for the corresponding quarter of financial year '26 was INR 218,608 crores. While the global environment remains uncertain, with geopolitical developments continue to post challenges for energy markets. Our commitment remains steadfast. We remain fully committed to safeguarding the nation's energy security and ensuring uninterrupted energy supplies across the country, while navigating these challenges with operational resilience and supply chain activity. At the same time, from a focus extent firmly beyond the immediate environment. We continue to maintain a strong emphasis on long-term strategic growth initiatives aimed at strengthening our core businesses, expanding our capabilities across the [indiscernible] revenue chain and supporting India's growing energy requirements. Since now professional financial heads will be briefed by Mr. Nitin Kumar, Executive Director, Corporate Finance and Treasury. Over to you, sir.

Thank you, sir. Dear investors and analysts, very good afternoon. Final note that today's discussion may include forward-looking statements which are based on currently available information, assumptions and expectations and are subject to uncertainties that could cause actual results, performance or achievements to differ materially from those expressed or implied. Participants are advised to refer to the company's latest filings with the regulatory authorities for a more detailed discussion of the risks and uncertainties. Before turning to our numbers, let me briefly touch upon the macro backdrop against which this quarter plays out. The U.S. matters has held its benchmark rate in the range of 3.5% to 3.57% through the quarter. With elevated inflation readings keeping the door open to further tightening other bank cards. On the domestic front, Bilge Monetary Policy Committee has similarly kept the reported unchanged at 5.25%, maintaining a neutral terms even as it flagged upside risk to inflation from valuated crude prices and global geopolitical tensions. Taken together, these segments are continued higher yield environment for the forces in near term. Coming to the ForEx market. The rupee remained volatile during Q1 of this year, depreciating to a quarterly low of about INR 96.83 per USD in mid-May on U.S. ran escalations and the state of our news closure before coring to around INR 94.67. RTI meter and U.S. Iran fire announcements is currently trading in the range of INR 5.86 per USD and continues to remain under pressure, driven by global geopolitical developments. As per TPC report, MS HMV consumption grew a healthy 7% and 5% sequentially over the previous quarter. Revering the resilience of India's mobility and industry demand, even amid celebrated pricing adjustment in response to volatile global markets. Volumes, however, contracted by around 5%, reflecting suspended international routes following recent space closures and softer air travel on the back of higher fair fares volumes declined by roughly 20%, largely a structural outcome of tighter regulatory norms on commercial supply and the commons demand optimization gets and soon after a weak start has since picked up its momentum, though distribution across regions remain uneasy. The progress of the monsoon will remain an important -- the reason for rural demand, aggregate output and consequently for oil consumption patterns in the agri and mobility segments. The average price of crude that is Indian basket during this quarter increased to $100.74 a barrel from $83.01a barrel in the immediately preceding quarter, that is Q4 of [indiscernible] Which is amounts to increase of about 21% due to ongoing U.S. Iran contract leading to supply disruptions. Now let me please touch upon the quarterly performing highlights. While we responsibly absorb a portion of investors to respike to shield the domestic market from inflational pressures, our overall volume footprint remains solid unequally positioning us for rapid margin recovery as global energy dynamics normalize and our optimized product mix takes full effect. Talking about the numbers. Now let me briefly touch upon the major verticals findings. During the quarter, refinery achieved good throughput of INR 19.2 with a capital utilization of 19.4% in comparison to throughput of 19.7% M&T and capital utilization of 13.9% in during the preceding quarter. For Q1 '25 '26, the throughput was at 18.7% MMT with cat escalation of 106.7%. Of our refineries have achieved the lowest ever quarterly sailings of 8.4% post BS VI are pipelines. During the quarter, Piper has achieved highest ever quarterly throughput of THB 28.5 with capital utilization of 79.9% with 27.7 million metric tonnes during the preceding quarter with captation of 78.3%. During the corresponding quarter of '25-'26, the capital utilization was about 73.5% with throughput of 26.3. Marketing. The total sales volume during the quarter was 26.21 MMT as compared to INR 27.3 during Q4 256 and 26.3% in Q1 of financial year 2025-'26. During the quarter, 320 red outlets were commissioned, taking the total number to INR 413 Recently, Indian Oil has launched Indian extra light now, a 10 kg composite LPG tender offering with express for our home delivery. Simultaneously, the popular 5 kg Indian shot cylinder will also now be available on express home delivery along with 10 kg extra like Northland. [indiscernible] right now offers customers a smart LPG experience through extra delivery, minimal documentation, [indiscernible] like digital booking and enhanced convenience. Launched initially in Pune, Gurugram, Indoor and PMT, the opening will subsequently be expanded to other cities in a sales manner. Petrochemicals. The sale of petrochemical products including exports during this quarter was 0.76 MMT compared to sale of 0.90 MT in the preceding quarter. Gas, during the quarter, we registered gas sales of 1873, which includes CGT sales of 670 MT as compared to total gas sales of 814, which includes CGD sales of 54 DMT during the preceding quarter. Renewable energy. Our wholly owned Green subtle company, Therapy Limited has received connectivity and approval of 2.6 gigawatt capacity on central transmission utility and state transmission utility. Project activities are in progress for setting up 100-megawatt wind power project in the state of Gaja. Additionally, leader, which is [indiscernible] today's new and renewable energy development agency have allotted 423 acres of land in the state of tubes for development of solar power plants of around 100 megawatt. Directly Limited is aggressively exploring commercial and industrial customers across India for providing reliable clean power through long-term power purchase agreements under the group captive open access mode. In is working to strengthen its position at the forefront of India's biofuel and energy transition agenda, aligning with nations to an objective of energy security and decarbonization across hydrogen and green hydrogen ethanol, biodiesel, use biobased and biogas and sustainable aviation in. The corporation continues to scale commercial capity and deepen its parter ecosystem. Turning [indiscernible] June '26. The company incurred a total CapEx of INR 6,461 crores encompassing investment across verticals. The vested CapEx target for this year is INR 32,700 crores. These investments are aligned with our long-term strategic road map and national energy priorities. The major refining and petrochemical expansion projects across Manikaran Gurkan Parapat advanced stage of execution, [indiscernible] and or targeted for completion between '26-'27. Phase while commissioning of processes utilities, offsite facilities are being undertaken in a structured manner to enable progressive capacity buildup and integration. So far as pointing on the finding expansion is concerned, it is expected to be completed by December '26, but early by December '26 and GujavbyNovember '26. Borrowings. With respect to the borrowing levels, the borrowing as on 30 June 26 was at INR 141,453 crores level compared to INR 10,668 crores as on 31st March '26 -- the increase in the borrowing was mainly on account of higher working capital requirements. As of 30th June 26, the company's gross debt equity ratio stood at 0.71, reflecting a comparable leverage profile. After adjusting for financial investments. The net debt-to-equity ratio further strengthens to 0.5, positioning us well to pursue growth opportunities as well as market volatility and maintain financial strength across cycles. With these words, I take a pause here and request Director Finance for his further remarks.

Thank you, Nitin. I would like to explain my appreciation to our investors and all stakeholders for their continued confidence and support. As India's energy landscape evolves, we remain committed to playing a pivotal role in meeting the company's rising energy demand while simultaneously advancing the nation's energy transition objectives. We will continue to pursue growth with discipline, resilience and with a long-term perspective, creating sustainable value for all of our stakeholders. With that, I will end my briefing here. We would now be happy to take your questions.

[Operator Instructions] The first question is from the line of Probal Sen from ICICI Securities.

My first question is actually a slightly broader one from a CapEx standpoint. Presentation shared earlier inside the company clearly shows that most downstream investments will actually be completed in calendar year '26. So just wanted your view on how you're looking at capital allocation for maybe the next 2 to 3 years? Will renewable be almost taking up the entire amount of focus? Are there any downstream brownfield or greenfield projects that you're still looking at? Just your perspective on how the capital allocation would look like from a 2- to 3-year perspective in the release. That's my first question.

Yes. Thank you. As you have known that we normed a CapEx of between INR 30,000 crores to INR 400 crores in a year. And our major expansions are getting over in this year itself. But if you see from next year onwards, we still have many pet chem projects where our CapEx will continue to be spent. As you are aware, we plan to enhance our petchem intensity from 6.5% to 15%. Estimated CapEx on the same would be around INR 10 crores over the next 5 to 6 years. All these projects are in the various stages of approval. So we are -- but as a [indiscernible] various projects are under discussion, whether it's renewables, whether it is pet chem, biofuels, we are also -- you have seen shipping, we are trying to acquire Sushi. So all these put together, our CapEx should be between INR 30,000 crores to INR 40,000 crores in the next 2, 3 years also.

Got it, sir. That's pretty useful. The second question was more about from a -- in this quarter, the GRM that you have mentioned, which is net of if the SAD [indiscernible] or export tax was not there just as a hypothetical, what would a normalized GRM has looked like? If we can quantify the SAD impact on a per barrel basis.

See, you know our reported GRM is $15.59 per barrel. And the GLs depend upon many factors, but to be pet-specific if you add SAD, it would be around $36 per barrel for indoor corporation.

That would have been the gross number, if we were to include?

Yes, yes.

Got it. Sir, one last question, if I may, sir. How much has LPG loss per cylinder reduced in the current quarter? And what was it for cylinder for us in 1Q?

See, as you see that I will give you the month-wise data. In the month of June, Okay. After the price decision, my under recovery per vendor was in the range of INR 665 end, which in the month of July, the figures may very because it was around INR 475 per surrender. August, it came down because the Southeast City came down significantly. And you know that the Southeast CP came from -- down from INR 796 million to INR 592 million and now in the -- now it is -- South CP has again gone up from INR 569 to INR 632 million We expect that during this quarter, it should be around INR 250 per cylinder.

That would be the average of the is what we're under.

It would be averaged in Q2. Assuming that the same Saudi CP continues for the next month as well. So Saudi, the under recovery has come down significantly reserve with July. I want to add that everything depends upon the geopolitical situation. You would have seen that we were seeing or suddenly, it has. Started showing upward trend.

The next question is from the line of Sabri Hazarika from Emkay Global.

Two questions. Firstly, was there any inventory impact in -- on the GRMs in Q1? And also on the marketing side, was there an inventory impact.

See, yes, there was an inventory impact on GRM and there was an inventory gain on finished goods. So we had the impact on both the -- so if you talk about crude side, we had an impact of 3 to 4.

Just loss or gain?

It was a loss. And in case of finished goods, we had a gain. So that also helped us to mitigate our losses for this quarter.

Okay. So finished good gains could be like around 600 crore, INR 7,000 crores. I'm just making an upcode based on some of your peers.

No, it was on a little bit on the higher side because, as you know, we are carrying a huge inventory in our system. So it was around INR 15,000 crores.

INR 15,000 crores for the quarter.

Yes.

Okay, fair enough. And this was mostly for all the products, right, petrol diesel, LPG, everywhere, there is a price increase.

Yes. Not because of price increase, there are many other factors. So I don't want to say it was on account of price increase. It was on account of the vision in the pricing.

Okay. And Asia, sir, secondly, on your project. So can we see full impact of the refining projects in FY '28 in terms of any escalation in GRM also that could take full time. I know you've taken it up in the past also, but can you just like, again, revise us on what is the expectation? And also the PXP project which you've stated that it will commission soon. So when that is expected to add to [indiscernible] ?

See, as we have said that, yes, most of the projects are going to be commissioned in the Quarter 3 of '26, '27 so definitely have installed capacity go up. And as you -- all the time, the crude -- the refining throughput will come in fees, [indiscernible] Next year, definitely, it will have -- our good projection is definitely on a higher side. So we expect in '27,'28, my throughput should be somewhere TPA.

Right. And any GRM acquisition?

You see GM has nothing to do with DL will all depend upon the play between the core prices and the product presses in the international market. So we cannot get it what would be the GRM next year.

The next question is from the line of Nitin Tiwari from Philip Capital lender.

[indiscernible] Iron for the opportunity and 1 in actions on a very ruling performance. This was a very difficult quarter. So following on the question of previous participants. Once our refinery expansions are concluded. I mean, of course, I mean commenting on GRM is difficult, but can you comment on yield? I mean, would it be possible for us to improve our yield over 80% that you usually have from our refinery.

You already know that this is 1 of the best performance distribute yield and our losses are also minimum. And we continue to improve it. And with the new modern expansion happening, we definitely expect that our GRM should improve.

Okay. So sir, what kind of deals -- can we expect that yield would improve to mid-80s. Is that a possibility from [indiscernible]

I can't give a specific number, but I would say that this is -- I will be able to process higher portion of value-added products. The returns are definitely going to go up.

Right, sir. And sir, secondly, I just wanted to understand a little bit on our pricing policy. So the previous quarter was, of course, an anomalous one. But a mid-May onwards, we did take some price increase. So I mean, given that crisis in West Asia has again cleared up, right? I mean, so where do we stand in terms of like petrol and diesel? Are you looking losses in these products again? And like are you considering any price revisions, if you can comment on that? And how do we go about understanding your pricing action if we have to do [indiscernible]

See, as far as pricing is concerned, it is very, very dynamic. Situation is so dynamic that you can see it is changing on a day-to-day basis. So if you -- but broadly, I can say that we remain engaged with the concerned authorities on this issue. And particularly, I talked about the LPG that we are hopeful that we would be getting a reasonable support from the government of India on the LPG. And based on the past experience also, we have seen that government has fully extended support to here in LPG, based on the past [indiscernible] we are confident that suitable compensation for LPG under recoveries will be considered. Yes, there would be uncertainty in the timing compensations and the quantum, but we are definitely sure that on the LPG part, we are going to get support. As far as the other products are concerned, the situation remains very dynamic. And we are -- many factors affect the pricing. So it depends upon the crude cost, the product margin, exchange rate movements, freight market, insurance markets, inventory gain and losses. So many things will be affecting. So all these factors would be considered and the appropriate decision will be taken.

Sure, sir. Sir, lastly, if I may, let me just continue on the pricing question. So what was the increase in the commercial diesel price that we are taking. The retail, I suppose, was INR 7.5, but how much was the commercial diesel price please highlight that? And also what is the portion of commercial diesel sales in our overall [indiscernible] ?

I mean just give me 1 minute. But the commercial diesel prices are moving in tandem with the are always moving in tender with the international market because the LPG prices for commercial consumers are always into the international market prices. And is on the contractual terms, whatever discounts is being passed as per the contracted terms. So it would not -- so -- but I would broadly say that even today, the prices have got modified -- for these things, product prices move on as per the [indiscernible]

Any indicative number in rupees per litigants which are charging for commercial convention?

Our if you say 10% to 15% of from total SSD volume is bulk volume. On that factor, if you want to factor in that, these presale would be moving as per the international prices.

Understood.

If you want to have a specific data, my team would be happy to give you after this con call, what has been the consumer prices in the past 3 to 4 months.

The next question is from the line of Shiva Kanan from Ambit Capital.

I have 2 questions. The first one is with respect to the landed cost of crew. If you can help us understand the buildup of that, let's say, the costs -- physical costs plus the plus insurance and pray. And how does it compare versus, let's say, 4Q let's say, just when the crisis began in March, how much of a premium or discount on the Brent were you getting landed in India versus how it is now? And has there been any change in trend in the last month or so, that will be great if you can help us with that? That's my first question. The second one is on the supply chain. What more can you do in terms of, let's say, improving the ability of Indian oil companies to source crude without being at the mercy of market vagaries. I understand that there is some JV between the I mean, MoU between the [indiscernible] and Ministry of shipping, is there any progress there, if you can talk about this topic?

Okay. See, relevant we talk about the good prices, I think it would be very important to benchmark at what benchmark we were buying before the world happened and what we are doing today. So roughly, I can tell you, because it keeps on changing on each transaction, what we are doing. Fee was generally IUC was buying Brent minus $1 or $2 in the market. But since the wall has started, you all know that the cool oil prices went very high. So we had a procurement cost of around $10 per barrel over [indiscernible] Brent during the peak of the wall. It's season changing. So overall impact, I would say it was somewhere around $10, if you see. So now -- but in the month of July, again, it came down to $2 to $3 per barrel. And again, it is going up. So it is moving on for net to one bid-to-bid. But yes, on the overall sand you can say, there was an impact of $10 per barrel on the peak of the world situation. And coming to your second question that what we are doing for the supply chain. I think -- I would say, definitely, we have diversified our portfolio. You would have seen that we are not dependent on 1 single source, yes, Middle East remains to be the main source, but we have diversified our sourcing Russian crude whether it is a West African crude or Latin American crude, all these could have significantly diversified. And based on the geopolitical situation, we keep on changing our sourcing strategy. You would have seen that now even in the past quarter. Since the Middle East volume got affected, we have increased our procurement from South America. We have increased the procurement from West Africa, Russian, Venezuela even USA cargo came, it was a well diversified procurement strategy, which helps a company like [indiscernible] the -- now coming to your third question regarding the -- what is the status of the JV MOU between MOP and shipping. Yes, that is also one of our strategy, which even started before the war started. We wanted to have a shipping tonnage security as well. So I would say, under the 80s of MoPNG, Minister of shipping 19th September, a nonbinding MOU was signed. In this, the Indian Oil shall be exposing to procure 4 MR vessels to start with. And we are -- this is a JV where we have other partners, other [indiscernible] partners would be there. So this working is going on. Tenders are already out. So we're adjusting how much we can have a tone security by way of this joint venture company.

Just one follow-up on the first question. So the $10 overall impact that you mentioned, this is versus the Brent crude and secondly, does it include shipping and logistics costs? Or is it...

All included.

Okay. And this is for the overall portfolio right?

All included.

Next question is from the line of Keshav Soni from Kotak.