IOC Q1 net profit slumps 47 pc on lower refinery margins, inventory gains

State-owned Indian Oil Corporation (IOC) on Wednesday reported a 47 per cent drop in its first quarter net profit due to fall in refinery margins and inventory gains.

IOC reported a consolidated net profit of Rs 3,737.50 crore, or Rs 4.07 per share, as compared with Rs 7,092.42 crore, or Rs 7.48 a share, in the corresponding period a year ago, the company said in a statement.

"The variation is majorly on account of lower inventory gain during the quarter," it said.

IOC, the nation's biggest oil firm, recorded an inventory gain of Rs 2,362 crore as opposed to Rs 7,065 crore gain in the April-June 2018 period.

Inventory gain accrues when a company buys raw material (crude oil in case of IOC) at a given price but by the time it is able to process and convert it into consumable products (fuel in case of IOC), prices have moved up. And, since final product is sold at a prevailing market price, the company books an inventory gain. Inventory loss occurs when the reverse happens.

Revenue was almost flat at Rs 1.53 lakh crore in the first quarter of 2019-20.

The company earned USD 4.69 on turning every barrel of crude oil into fuel in April-June, down from USD 10.21 per barrel average gross refining margin (GRM) in the corresponding quarter of the previous financial year.

"GRM excluding inventory gain/loss and price lag for Q1 is USD 2.27 per barrel as compared to USD 5.18 a barrel in Q1 2018-19," the statement said.

IOC said it had a foreign exchange (forex) gain of Rs 91.75 crore in the first quarter as compared with Rs 1,804.85 crore forex loss in the previous year.

IOC Chairman Sanjiv Singh said the company sold 22.66 million tonne of products, including exports, during the first quarter of the financial year 2019-20.

Refineries processed 17.28 million tonne of crude oil and the firm's countrywide pipelines network transported 21.85 million tonne during the quarter.

The company got Rs 656 crore subsidy support for kerosene sold through public distribution system and Rs 3,997 crore for cooking gas (LPG).