OIL looks to liquidate short term debt raised for NRL buy in current fiscal

The push to liquidate debt will mean no more acquisition or fund raising being planned this year

Oil India (OIL) is looking to completely liquidate its short-term debt of Rs 4,300 crore in the current financial year itself. According to company officials, Rs 2,350 crore of this short-term debt has been repaid. This amount was raised by OIL to acquire Bharat Petroleum Corporation’s stake in Numaligarh Refinery (NRL) for Rs 8,676 crore. In all, OIL had raised Rs 6,300 crore, including Rs 2,000 crore of long-term debt, for this transaction. The push to liquidate this debt will also mean no more acquisition or fund raising being planned this year.

Speaking to Business Standard, OIL’s Director (Finance) Harish Madhav said, “We have liquid funds of about Rs 1,800 crore including cash surplus of about Rs 400 crore in hand. We do not have any plans for raising funds money this year. In fact, we will attempt to liquidate the loans we raised last year for the purchase of stake in Numaligarh Refinery (NRL) provided the liquidity position remains good because of crude oil prices.”

OIL’s further stake buys into NRL, also called the Assam Accord refinery, was necessary to allow the government to go ahead with the strategic sale of BPCL. With this, OIL now holds 80.16 per cent stake in NRL.

“There are no other plans of acquisition or fresh fund raising in the pipeline right now,” Madhav added.

OIL recently reported its first quarter results for the financial year 2021-22. The consolidated net profit rose to Rs 12,14.65 crore, up from Rs 377.63 crore in the same months of financial year 2020-21. The total income also rose to Rs 6,276 crore, up from Rs 4,334 crore.

On a standalone basis, net profit stood at Rs 677 crore. OIL has reported a standalone loss of Rs 252 crore in the comparable quarter of the previous financial year. But profits were lower sequentially that stood at Rs 1,140 crore in the fourth quarter of the financial year 2020-21.

Commenting on the same, Madhav said, “We should not compare the profits of the fourth quarter of FY21 and the first quarter of financial year FY22. This is because in third and fourth quarters, companies in which we have shareholdings such as Indian Oil and others declare interim dividends. Whereas in the first quarter, no dividends are received. Almost Rs 1,100 crore was the dividend income in the fourth quarter of FY21.”

“Therefore, it is more appropriate to compare results with corresponding period of previous year. However, you may compare the crude oil revenue, turnover, and expenditure, and production sequentially,” he said.

Madhav said oil prices were expected to be at a comfortable level. “It is very difficult to predict anything traded on exchanges. But the expectation is that crude oil would remain in the range of $60-65 a barrel. This is a comfortable range for us. Hopefully, it will remain in this range. When crude oil prices fell last year, there were production adjustments globally,” Madhav said.

He also expects natural gas margins for OIL to improve from September 2021 as the government may hike prices by around 50 per cent. Responding to a query on whether he expects margins and gas production to improve, Madhav said, “The trend reflects that it (the gas price) should go up. Margins will improve but natural gas production will remain at the same levels. This is because production ramp up, especially for national oil companies like us, is not subject to pricing.”