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Indian Oil Corporation Ltd.

BSE: 530965 Sector: Oil & Gas
NSE: IOC ISIN Code: INE242A01010
BSE LIVE 13:47 | 18 Aug 428.55 3.10
(0.73%)
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425.50

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436.00

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NSE 13:31 | 18 Aug 427.20 0.90
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OPEN

427.00

HIGH

436.00

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OPEN 425.50
PREVIOUS CLOSE 425.45
VOLUME 751305
52-Week high 450.65
52-Week low 269.00
P/E 13.53
Mkt Cap.(Rs cr) 208,100
Buy Price 428.40
Buy Qty 1597.00
Sell Price 428.55
Sell Qty 178.00
OPEN 425.50
CLOSE 425.45
VOLUME 751305
52-Week high 450.65
52-Week low 269.00
P/E 13.53
Mkt Cap.(Rs cr) 208,100
Buy Price 428.40
Buy Qty 1597.00
Sell Price 428.55
Sell Qty 178.00

Indian Oil Corporation Ltd. (IOC) - Chairman Speech

Company chairman speech

From the Chairman’s Desk

Dear shareowners heartiest greetings from indianoil!

On behalf of IndianOilPeople and the Board it is indeed an honour and a privilege toshare my thoughts with you through the Annual Report 2015-16.

Today as India emerges as a major driver of global growth and is hailed as the‘brightest spot’ on the world economic horizon it is indeed an exciting timefor IndianOil to fuel one of the fastest growing economies of the world.

VIBRANT INDIA

The unprecedented economic boom in India is being driven by an increasinglyaspirational billion-plus population a large and diversified industrial base rapidurbanisation the auto sector boom and the huge demand for energy in households. Thisprocess is being catalysed by the Government’s thrust on holistic development andinclusive growth. Programmes such as Make in India Digital India Skill India SmartCities and Start-up India are being undertaken in mission mode to acceleratethe transformation of the Indian economy.

IndianOil which defines itself as The Energy of India has since inception aligned itscorporate strategies with the greater good of the country and its people. Using its strongpresence in every segment of the downstream hydrocarbons business IndianOil isenthusiastically implementing the Government’s developmental schemes with sustainedvigour.

The oil & gas sector too under the Ministry of Petroleum & Natural Gas isdeeply committed to making energy available accessible and affordable across thesocio-economic divides especially to the marginalised sections of the population.IndianOil which defines itself as The Energy of India has since inception alignedits corporate strategies with the greater good of the country and its people. Using itsstrong presence in every segment of the downstream hydrocarbons business IndianOil isenthusiastically implementing the Government’s developmental schemes with sustainedvigour. With IndianOil in the lead the national oil companies have already wonappreciation for their contribution to initiatives like the PaHaL scheme for directbenefit transfer for LPG consumers (recognised by the Guinness

Book of World Records as the largest cash transfer programme for households in theworld) and the GiveItUp campaign where over a crore affluent households voluntarilygave up their LPG subsidy.

Pradhan Mantri Ujjwala Yojana (PMUY) is now being launched in a big way across thecountry to provide free LPG cooking gas connections to BPL families utilising theenormous resources freed through PaHaL and

GiveItUp schemes.

Energy is the driver of economic growth and a rising India is taking all necessarysteps to ensure energy sufficiency. To bolster energy security the Government of India isactively pursuing a policy to attract foreign direct investment in the upstream sector. Ithas set an ambitious target of 10 per cent reduction in crude oil imports by the year 2022that will act as a stimulus for intensifying domestic production.

The Government is also encouraging the Indian companies to acquire foreign oil &gas assets as a consortium. Simultaneously oil diplomacy has been intensified throughmeaningful engagements with hydrocarbon-rich countries mostly in Africa and the Gulfregion. All this presents a great opportunity for IndianOil to deploy its multiplestrengths in ensuring the energy security of the nation.

Vibrant indianoil: exceeding expectations

IndianOil had an excellent financial year 2015-16 and despite inventory losses in Q4posted its highest profit of Rs. 10399 crore (US$ 1.59 billion).

The long-awaited greenfield Paradip Refinery was dedicated to the nation byHon’ble Prime Minister Shri Narendra Modi in a grand ceremony on 7thFebruary 2016.

With the commissioning of Paradip IndianOil’s leadership position in the refiningsector has further strengthened. Now its combined 80 million metric tonnes per annum(MMTPA) capacity is 35% of the national refining capacity. This is also in tandem with ourannual sales volume and pipelines throughput as well. IndianOil’s Refineries Divisionencompasses a diverse clutch of refineries of different capacities and complexities; fromthe oldest refinery in the world at Digboi in Assam to the country’s most modernrefinery at Paradip in Odisha. During the year 2015-16 the Division did exceedingly wellin terms of all its performance parameters. The Pipelines Division is another jewel in thecrown of IndianOil. The pipeliners efficiently manage a hi-tech network of nearly 12000kilometres that feeds the refineries with crude oil and moves the finished products tohigh-consumption centres. They too performed with great distinction in the year 2015-16.

The Marketing Division the face of the Corporation efficiently manages the complexlogistics of reaching petroleum products across the nation right up to the remotestvillage and hamlet. This is done through over 45000+ customer touch points that makeIndianOil one of the business entities with the largest customer interface in the world.

Marketing Division’s performance in the year 2015-16 is a matter of pride as itsold the highest volume ever. Currently IndianOil is in the process of further expandingits marketing network in a big way in the underserved areas of rural and rurban India. Italready has 6700+ Kisan Seva Kendra outlets that are a lifeline to the

Our new business lines of Petrochemicals and Natural Gas are fast emerging asprofitable verticals in their own right and IndianOil is tapping emerging opportunities bybuilding LNG terminals and expanding capacities in its petrochemical units to createinfrastructure well ahead of demand.

farmers supplying them fuels and other daily essentials from their multi-purposestores.

Indane currently has about 10 crore customers and this figure will see a steep rise inthe coming years on account of the PMUY scheme as well as IndianOil’s popular‘Smokeless Villages’ campaign besides issue of regular connections. SERVOlubricants are also doing extremely well and are now exported to 27 overseas markets.

IndianOil Aviation Service which completed 50 golden years in 2015 is anotherbusiness vertical that is all set for a major take-off in view of the new aviation policyannounced by the Government of India which focusses on regional air connectivity.

Our new business lines of Petrochemicals and Natural Gas are fast emerging asprofitable verticals in their own right and IndianOil is tapping emerging opportunities bybuilding LNG terminals and expanding capacities in its petrochemical units to createinfrastructure well ahead of demand. Our E&P footprint has expanded across continentsthrough strategic acquisition of hydrocarbon assets both conventional and unconventionalin partnership with leading oil & gas operators.

The Corporation’s cutting-edge R&D has blossomed into a bouquet of world-classrefining processes that are being implemented full-scale in various IndianOil refineriesfor yield maximisation.

As a responsible corporate citizen IndianOil is deeply committed to creating alow-carbon economy. Its wind and solar power projects are projected to generate 260 MW ofrenewable power by the year 2022.

Our assets are of strategic importance and hence their security. The Corporation istaking additional necessary steps to further strengthen the security of its installations.

Safety is of utmost importance in our industry and we are ensuring that safety ethicsis an integral part of the behavioural profile of employees through regular training mockfire-drills and state-of-the-art safety systems to make our operating locations safe andincident-free.

Sensitivity to the environment is now a global imperative. Each new project proposaltherefore is being looked at both from the perspective of commercial viability andsustainability.

The overall outstanding physical performance of IndianOil in during the year 2015-16 isobviously attributable to IndianOilPeople.

Every successful enterprise has a DNA that is intrinsically its own. Our corporate DNAis our core values of CARE INNOVATION PASSION & TRUST. Over the yearsIndianOilPeople have come to imbibe these and demonstrate them in their daily life.

As a tribute to the intrepid IndianOilPeople the year 2016 is being observed as the Yearof Core Values across the organisation.

Indian oil’s six-fold Path to excellence

Equipped with core values IndianOilPeople are now pursuing a six-fold path in theircommon quest for excellence. This model designed about two years ago has proved to be aneffective template for corporate excellence.

Sustaining leadership in core businesses

Our core business is liquid fuels LPG lubes petrochemicals and natural gas. With theprognosis that fossil fuels will continue to dominate the energy mix till the year 2040we have a fairly large window of opportunity to profitably expand in our core businesswhile at the same time getting ready for the low-carbon economy of the future. IndianOilis self-sufficient in the refining segment but keeping in view the rising demand forpetroleum products in the short-term we are aiming at a refining capacity of about100-110 MMTPA by the year 2022 and progressively scale it up to least 150 MMTPA by theyear 2030. Again our pipelines grid is growing proportionately to connect with principalconsumption centres in almost all major States for a balanced development of the country.The marketing infrastructure is also being expanded in tandem with our growing refiningcapacity. We have 45000+ customer touch points as of now and this number will go upfurther in the next five years especially in rural and virgin markets in order to securethe first-mover advantage.

Retail transformation is being taken up in a big way; innovative solutions are on toretain leadership in the rapidly expanding aviation fuel segment; operationsinfrastructure is being strengthened in the form of state-of-the-art fully automated‘smart’ terminals.

LPG is being mainstreamed in rural India; like PaHaL and GiveItUp PMUY promisesto be a resounding success and customer service is being further improved through amassive training of resellers and their staff. Automation of our 25000+ fuel stations isanother priority area that the

Corporation is focussed upon; we are increasingly adopting IT-based apps for giving ourdigital-savvy customers a memorable retail experience.

Our leadership in the lube segment is assured as we have launched an innovativecost-reduction-cum-value-addition programme.

The objective of our entire business is to optimise end-to-end logistics ensuringready availability of petroleum products across theretail-bulk-industrial-defence-transport-household sectors in a safe and efficient manner.

We have to ensure that IndianOil remains a leader and the company of choice for ourcustomers across the country. This objective is being pursued through a newly created CRMdepartment that is holistically pursuing customer analytics for tweaking and realigningour marketing strategies.

A Strategy Cell has also been set up which is preparing road maps for future growth ofIndianOil as an energy business amid multiple scenarios.

Winning with operational excellence

The objective of our entire business is to optimise end-to-end logistics ensuringready availability of petroleum products across theretail-bulk-industrial-defence-transport-household sectors in a safe and efficient manner.

To boost operational excellence core elements covering the entire spectrum of theCorporation’s operations were identified for adoption by OE champions in theirindividual work-areas. By breaking down the elements further into sub-points for ease ofimplementation the exercise aims to achieve standardisation and homogeneous replicationof operation of the Corporation’s assets across divisions in a safe reliableefficient and sustainable manner.

Elimination of unplanned shutdowns through preventive and predictive maintenanceschedules distillate yield enhancement through in-house processes reducing fuel lossesand a culture of built-in energy conservation technologies are being undertaken inrefineries.

Investing in people

The philosophy of the six-fold path is anchored in the belief that IndianOilPeoplebring back the best returns on investments made on them.

Indeed the multi-talented Team IndianOil has built and sustained this greatCorporation for more than five decades now.

IndianOil with a clear human resource budgeting process has an enduring tradition torecruit the best talent for a full career cycle employment. Through right fitmentmentoring job rotations regular training and challenging assignments with focus on skilldevelopment their repertoire of conceptual human and leadership skills are continuouslyhoned and enriched.

The organisation has 22 fully equipped training centres across its Divisions and majorunits which coach both executives and non-executives in functional and behavioural areas.The apex corporate learning institute

IndianOil Institute of Petroleum Management (IIPM) in NCR organises strategic andniche training programmes for senior management. It is also the venue for the CorporateInduction module for newly-recruited officers at the entry level.

IiPM is now a talent crucible a centre for excellence that will create the leadershipof the future. Under Project Saksham the competency mapping instrument LeadershipCentre identifies the competency profile of executives; thereafter the competencygaps if any are filled through appropriate developmental interventions.

Mainstreaming financial prudence

IndianOil has a glorious tradition of always making reasonable profits in itsoperations. It is also one of the largest contributors to the Central and Statesexchequer.

As a public sector Maharatna enterprise IndianOil deals with public money andis therefore extraordinarily careful with its financial resources. As a result it has avery high credit rating among bankers – both in India and abroad. In order to makefinancial prudence an IndianOil way cost reduction and simplification and automation ofwork processes are being encouraged across the organisation.

Measures such as reduction in the share of term contract in crude oil procurementwidening the crude oil basket as also inclusion of opportunity/difficult grades whileminimising tendering time have ensured significant savings in raw material costs.

Efficient working capital management helped lower borrowing costs. Optimisation ofsecondary distribution and impor t logistics and centralisation of insurance also broughtin substantial savings. Consolidation and centralisation of certain regulatorytransactions compliance activities and establishment areas have resulted in processsimplification and savings. The financial and management control information system hasbeen made more structured and analytics is being used to identify opportunity areas.

Leveraging assets

IndianOil has a rich legacy of corporate milestones in its journey of over fivedecades. During this journey the Corporation has emerged as a pan-India entity with anunparalleled network of physical assets.

IndianOil’s asset base of USD 26 billion comprises refineries and petrochemicalplants cross-country pipelines a world-class R&D Centre bulk storage terminalsdepots aviation fuel stations LPG bottling plants and over 45000 customer touch pointsbesides E&P assets and gas infrastructure. These assets spanning the entire spectrumof the hydrocarbons value chain are an indication of our emergence as an integratedenergy major.

IndianOil has a rich legacy of corporate milestones in its journey of over fivedecades. During this journey the Corporation has emerged as a pan-India entity with anunparalleled network of physical assets.

It is with this background that ‘Leveraging our Assets’ has beenearmarked as one of the six focus areas. This project has the potential to be atransformational financial strategy within the organisation. The first stepping stonetowards realising better value from the assets has already been laid. To optimallyleverage the Corporation’s pan-India network of physical assets and unlock their fullpotential a rolling plan structure was launched in January 2016 with projects bothmajor and minor chosen for implementation in Phase-I. The projects cover capacityutilisation and yields petrochemical and other value-additions and new pipeline projectsas well as measures to achieve flexibility to adapt to new trends and new demands.

Enhancing corporate reputation and brand value

IndianOil with a brand value of USD 3.2 billion is a respected trusted and admiredbusiness group by all its stakeholders employees shareholders business associatesvendors and of course its customers.

IndianOil was created in the spirit of a national trust for economic prosperity and ourpredecessors have assiduously built a formidable reputation and brand value. This is agreat inheritance on which we intend to build an even grander edifice.

IndianOil’s Superbrands like SERVO & Indane are among the mosttrusted in the country. The ubiquitous 25000+ chain of IndianOil fuel stations have alsobeen repeatedly conferred the Reader’s Digest Award under the most trustedbrand category.

Our world-class R&D Centre’s prolific and innovative output of over 450patents applied technologies yield-enhancing refinery processes like

INDMAX OCTAMAX IndAdeptG etc. are the other achievements that addsheen to our brand value.

Similarly the service brand IndianOil Aviation serves the Indian Air Force andscores of national and private airlines through its network of 101 aviation fuel stationsspread across the country living up to its tagline "Our groundwork takes you skyhigh."

During natural calamities time and again IndianOil has gone beyond the call of dutyand not only maintained the supply line but also helped in the rescue missions of the armyand the air force. IndianOil’s corporate communications strategy focusses onhighlighting our unique contributions to the growth of the economy. Today besides theconventional media platforms IndianOil is increasingly using new media to connect withits stakeholders. With a view to enhance the Corporation’s reputation and brandvalue steps have been taken to boost its social media presence (Facebook TwitterYouTube and Instagram) and through regular one-to-one interactions of the Chairman andDirectors with eminent journalists from print and electronic media.

Co-creating a Great Future for indianoil

The greatest challenge before any successful leader is to sustain leadership. Thecurrent dynamic environment poses many challenges to IndianOil. But at the same time itpresents a great opportunity for us to demonstrate our formidable calibre.

The energy market of the future will see a lot of competition to fuel India’sgrowth and development. Competition ultimately benefits the customer and helps in raisingthe standards within an industry. The expectations and aspirations of the Indian customersare changing and they are becoming increasingly assertive in demanding the best ofproducts and services. With the entry of competitors both domestic and foreign growthprospects look tough. But in reality it is an opportunity to bring out the best in us insync with our proven core values and the six-fold path model of excellence discussedearlier.

In the new competitive scenario we have to be observant agile and responsive toquickly take advantage of the emerging market trends and convert them to customer-gainingand retaining opportunities. Here a robust customer relationship management strategybacked by innovative technology will play a crucial role. Another point that I would liketo underscore is that we should learn from other new-age industries in our constantendeavour to upgrade our customer service standards.

The demand for petroleum products is showing high growth and as per currentprojections this trend will continue. As a market leader we have to further buildcapabilities and expand capacities in refining pipeline grids and marketinginfrastructure. We are geared to fully utilise our nationwide reach and infrastructure tooptimise product movements in the safest and most cost-effective manner.

Since the share of natural gas in the primary energy basket is going up we arebuilding gas import terminals and pipelines taking up piped natural gas distribution incities and expanding capacities in advance for garnering a substantial share of theemerging gas market. In petrochemicals we are already the second biggest domestic playerand are working towards increasing our market share further.

Mass movements for environment conservation are demanding cleaner fuels and are puttingrestrictions on building infrastructure. We are a company with a green conscience and arefully prepared to supply BS-IV and BS-VI grade auto fuels with substantial investments asper the timelines laid down by the Government of India. Transition to alternative forms ofenergy is picking up momentum and being an energy company we are preparing for thisparadigm shift. We have already made big investments in both solar and wind-power projectsand are well placed to quickly adapt to future needs.

Extensive research is being taken up in many parts of the world in new forms of energyand storage devices and to bring in innovative technologies to substitute fossil fuels.Successful breakthroughs among them could disrupt the business operations of the companiesmarketing traditional forms of energy. While we are mindful of and constantly on the vigilfor such developments as a reliable energy provider we need to responsibly cater to theneeds of all our customers even when such new options do not materialise in the future.We are therefore making calculated investments to meet future energy demands weighingall such options. In line with international trends our R&D is also focussed onresearch into new forms of energy. Accordingly we are adding and improving our currentportfolio of energy products upgrading our processes and creating innovative technologiesas world-class offerings.

Team IndianOil is a rich blend of youth and experience. This inclusive diversity willfurther flourish as we become a larger integrated entity. IndianOilPeople have a strongsense of emotional ownership of our company and their collective commitment is our mostenduring strength. This fact is truly reflected in the overwhelming success of therecently concluded offer for sale of the company’s equity shares to IndianOilemployees which saw the highest ever participation in an Indian company a factcorroborated by the Ministry of Finance.

The collective wisdom of the senior management the sage counsel of my colleagues inthe board the guidance of our parent ministry and above all sustained support of ourshareholders will help IndianOilPeople achieve the multiple objectives of IndianOil’svision.

Come let us join hands in co-creating a resurgent IndianOil to energise the growth ofa vibrant and victorious India.

B ashok

Chairman