Despite Interest Cost Jump, Ioc Net Rises 12.7%

Despite a 100 per cent rise in interest costs and a 32.7 per cent fall in other income, Indian Oil Corporation (IOC) managed to post a 12.7 per cent rise in net profit for 1996-97. Dividend has been hiked by Re 1 per share to Rs 4 per share and EPS has risen 12.78 per cent to Rs 36.17.

India's largest company in turnover and profitability, IOC's net sales from operations rose 26.3 per cent to Rs 55,389 crore surpassing the 11.48 per cent growth posted last year. Sale of petroleum products rose 5.3 per cent to 41.97 million tonnes.

Compared with the first half, growth has marginally tapered off with turnover in second half recording only Rs 27,422 compared to Rs 27,967 crore in first half. Net profit grew only to Rs 563.9 crore. Part of the reason was that first half net profit included Rs 348.3 crore on account of margin updations for previous years.

Thanks to overdues of around Rs 10,000 crore lying with the Oil Coordination Committee, (OCC), IOC's net interest burden jumped 100 per cent to Rs 309.84 crore. Total borrowings rose to Rs 13,178 crore and it borrowed Rs 4,951 crore more than it did last year.

Total gross interest costs (excluding interest income) jumped to Rs 1,075 crore from Rs 5601.5 crore.

The higher depreciation at Rs 799.17 crore and high interest costs resulted in a squeeze in the company's profit before tax. Against Rs 1765.33 crore last year, profit before tax this year was at Rs 1766.23 crore.

Operating margins fell to 4.9 per cent from 5.2 per cent and total expenditure increase by 32 per cent against 23 per cent last year thanks to higher expenditure incurred on crude and petroleum product purchases and on capital investments. Expenditure this year was Rs 59,405.18 crore.

Though it had availed of cheaper money during the year to finance its oil and petroleum product imports, the sheer volume of borrowings has succeeded in pushing up its cost.

In the first half, interest costs were only at Rs 125.8 crore and they jumped 146 per cent to the final figure.

IOC benefited from a lowering of tax burden by 44 per cent to Rs 358 crore. Commissioning of new projects like the Digboi refinery modernisation, the one million tonne crude distillation unit at Haldia refinery and the CRU at Barauni refinery.

With a refining capacity of 24.4 million tonnes, IOC's throughput rose to Rs 25.136 million tonnes.

The OCC currently owes nearly Rs 10,000 crore to IOC and in 1996-97 alone IOC's claims rose by Rs 5,563 crore.