Ioc Gains A Stranglehold In The North And East

Indian Oil Corporation's (IOC) acquisition of 33.58 per cent stake in the standalone oil marketing firm IBP Ltd will strengthen its presence in the northern and eastern regions of India.

The corporation, which currently has the largest marketing and refining network in India, currently has seven of its nine refineries, comprising over 75 per cent of its 47.5 million tonne per annum refining capacity, in these two regions.

However, only 56 per cent of its total number of retail outlets, numbering around 7,600, are currently present in the north and eastern states.

On the other hand, IBP has 64 per cent of its 1,550-outlets strong retail network in these two regions. Sector analysts said that the addition of 1,000 outlets at one-go give a tremendous boost to IOC's presence in these two regions.

"IOC's price of acquisition for IBP, at Rs 1,550 per share, is steeper than market expectations. However, in the northern and eastern regions, addition of almost a thousand IBP outlets will give tremendous strength to the company," an analyst at a leading brokerage firm here said.

During the previous fiscal, IOC's had registered a 39.8 per cent and 35 per cent marketshare for diesel and petrol respectively. IBP, on the other hand, had a marketshare of 9.6 per cent and 7.7 per cent, respectively, in these products.

The increase in marketshare through acquisition of IBP, which is considered a respectable brand, gives it a lion's share in the retail segment.

"The bad thing about the acquisition is that the government will still control the stake in a company that has divested, as essentially, it will only be an entry in the government's books. The good thing, however, is that it will set up a good precedent for the disinvestment in the oil sector, and will improve the confidence of the private and multinational companies," other analysts said.