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Indian Oil Corporation Ltd.

BSE: 530965 Sector: Oil & Gas
NSE: IOC ISIN Code: INE242A01010
BSE 00:00 | 20 Mar 158.60 -3.50
(-2.16%)
OPEN

162.30

HIGH

162.50

LOW

155.80

NSE 00:00 | 20 Mar 159.00 -3.70
(-2.27%)
OPEN

162.75

HIGH

162.75

LOW

155.70

OPEN 162.30
PREVIOUS CLOSE 162.10
VOLUME 1124750
52-Week high 185.00
52-Week low 105.65
P/E 9.32
Mkt Cap.(Rs cr) 149,309
Buy Price 158.00
Buy Qty 1030.00
Sell Price 158.50
Sell Qty 4.00
OPEN 162.30
CLOSE 162.10
VOLUME 1124750
52-Week high 185.00
52-Week low 105.65
P/E 9.32
Mkt Cap.(Rs cr) 149,309
Buy Price 158.00
Buy Qty 1030.00
Sell Price 158.50
Sell Qty 4.00

Indian Oil Corporation Ltd. (IOC) - Chairman Speech

Company chairman speech

Dear Valued Shareowners

Greetings to you on behalf of the 33000-strong IndianOil team.

It is once again my proud privilege to communicate with you through this Annual Report.This time we have attempted to publish an Integrated Annual Report that not only detailsthe Company's financial performance but also re_ects its commitment towards value creationfor its stakeholders. The integrated report makes specific reference to six key capitalsi.e. Financial Capital Manufactured Capital Human Capital Intellectual Capital Social& Relationship Capital and Natural Capital.

The integrated report emphasises the strong bonds of trust that IndianOil has builtwith its stakeholders over time and IndianOil's initiatives towards continuous growth inan exciting world of challenges and opportunities.

Industry Trends

The overall global economy continues to be robust and there is a broad consensus onacceleration of global GDP growth in the current year. India's GDP growth in 2018-19 isexpected to accelerate to 7.4% driven by improving global demand investment revivalrejuvenation of rural demand and reduction of internal barriers by GST.

For the global oil & gas industry geo-political uncertainties remain a key factor.After the comparatively lower price regime during 2014-17 crude oil prices began to riseagain from July 2017 impacting import-dependent economies like ours. The recent USsanctions on Iran have added further uncertainty to an already volatile market. HoweverSaudi Arabia and Russia have indicated increased supplies to provide a balance in theinterest of both oil-producing as well as oil-importing countries.

Oil-importing countries too are taking necessary steps for energy security. With ourplans of 10% reduction in oil imports by the year 2022 IndianOil is expanding its non-oilenergy portfolio as well as focussing on energy conservation and efficiency improvementmeasures.

IndianOil: 3600 Excellence

I am delighted to inform you that 2017-18 has been a great year for the Company acrossdivisions and verticals and we have once again surpassed previous records and posted aremarkable performance both in physical and fiscal terms.

The net profit of Rs. 21346 crore is the highest ever earned by your Company and forthe second consecutive year IndianOil has emerged as the most profitable Central PublicSector Enterprise.

Indeed our differentiators are our strong financials – our net worth of Rs.91664 crore our debt/equity ratio of 0.53:1 and our comfortable debt level of Rs. 58030crore. Our EBITDA of Rs. 43079 crore is the highest ever; so are our earnings of Rs.506428 crore. As a national trust for economic prosperity our contribution to theexchequers is also high at Rs. 190670 crore.

The total Equity (Share Capital and Reserves & Surplus) of the Company crossedRupees One Lakh crore during the year and stood at Rs. 110171 crore as on 31stMarch 2018.

Besides an interim dividend of Rs. 19/- per share paid during the year the Board ofyour Company has recommended a final dividend of Rs. 2/- per share. This is in addition tosuccessive issue of bonus shares in the ratio of 1:1 during the financial years 2016-17and 2017-18.

Consolidating Core Business

IndianOil energises all sectors of the economy and all sections of society taking awide range of products & services closest to the end-users through its countrywidenetwork of customer touch-points. The Company is constantly innovating and deployingtechnology to align its processes products and services with the changing aspirations ofits customers.

In 2017-18 IndianOil achieved record sales to lead the market besides expansion ofmarketing infrastructure and retail network particularly fuel stations and LPGdistributorships. New aviation fuel stations (AFS) commenced operations at PuducherryKadapa and Shillong raising their total to 107. ‘Smart terminals' concept wasintroduced at 21 more locations during the year taking their cumulative tally to 84.

With rigorous monitoring and in-time execution of projects IndianOil achieved thecapital expenditure target of over Rs. 20000 crore for the year 2017-18.

IndianOil's LPG sales crossed 10 million tonnes during the fiscal. The Company releasedmore than one crore LPG connections for the third consecutive financial year. For customerconvenience Indane refill booking facility was enabled through IndianOil'sofficial Facebook and Twitter pages also.

Daily price revision of automotive fuels petrol and diesel was rolled out across thenation in June 2017 to further streamline the mechanism. The Company's automated fuelstations have now crossed the 13000 mark covering 50% of the network providing moreefficiency and transparency. Over 34% of them have also converted their operations to runon solar energy.

IndianOil's SERVO brand improved its market share in finished lubricants duringthe year. Several strategic steps were taken to further improve performance.

With Paradip Refinery achieving 100% capacity utilisation during the year IndianOilrefineries together achieved a record annual throughput of 69 MMTPA which was 5.8% higherthan that of the previous year. The year 2017-18 also witnessed the highest everproduction of MS HSD ATF LPG bitumen polypropylene and Linear Alkyl Benzene. Mathura& Panipat refineries commenced BS-VI grade auto fuel supplies to the National CapitalTerritory (NCT) from April 1 2018 to meet the advanced timeline.

To boost flexibility in crude oil sourcing the Company's crude oil basket was furtherexpanded with inclusion of 16 new grades 11 of which were of US origin. IndianOil wasalso the first among Indian refiners to import and process US crude oil. Enhancedoperational efficiency processing of opportunity crudes (heavy low-sulphur heavyhigh-sulphur and high-TAN) and a marked reduction in unplanned shutdowns helped improvegross refining margin for IndianOil refineries.

Several initiatives were taken to minimise crude oil costs in a volatile marketscenario. Besides movement of the highest-ever quantity of crude oil by sea better vesselfreight rates and reduction in shipping costs yielded additional savings.

For IndianOil pipelines too 2017-18 was yet another year of expansion andconsolidation as the network crossed the 13000-km mark and achieved 3.5% higher combinedthroughput compared to the previous year. With the commissioning of the 1073-kmParadip-Raipur-Ranchi pipelines system finished products are now being pumped to allterminals en route resulting in significant savings in transportation costs.

In R&D the year was marked by deployment of major in-house technologies atthe Company's refineries as well as commercialisation of many lubricant formulations. AnOctamax unit was commissioned at Mathura Refinery to produce high-octane fuel for BS-VIgasoline pool with technology conceptualised by IndianOil R&D. Over 80 patents werefiled during the year and approval was received for 54 taking the total number of activepatents beyond 600. A BS-VI emission test facility was commissioned for all types of fuelssuch as petrol diesel ethanol-blended petrol bio-diesel CNG LNG Hydrogen-CNG and2G-ethanol blends as per superior BS-VI norms.

A number of indigenously developed technologies by IndianOil R&D are being deployedwhile upgrading the Company's refineries for production of BS-VI fuels.

Accelerating Extended Businesses

IndianOil's growing business verticals of Petrochemicals Natural Gas and Exploration& Production have become integral business drivers for the Company.

Riding on a robust consumer demand and patronage in addition to growing domesticmarket IndianOil's PROPEL brand petrochemicals have also found acceptance in 75countries.

With focus on market expansion the Company developed a number of polymer gradescustomised to specific applications during the year.

IndianOil's natural gas sales grew by nearly 2% during the year. To meet growingdemand the Company imported the highest-ever volumes of LNG during the year and also tiedup with producers for additional quantities.

The Company's upstream assets registered a 66% growth in annual production and a 99%growth in revenue. Acquisition of stakes in Russian fields has been a major factor in thisuptick. During the year IndianOil acquired participating interest in two more overseasproducing assets Lower Zakum Abu Dhabi and Mukhaizna of Oman as part of a consortium.

Preparing to be Future-Ready

As the leading refiner in the country and a dominant player across a diverse portfolioof offerings in energy IndianOil is focussing on all emerging opportunities for organicand inorganic growth through vertical integration and strategic diversification besidespursuing value-creating research areas.

As part of this projects costing approx. Rs. 32000 crore are in various stages ofexecution and plans are underway for implementing more projects costing about Rs.1.43 lakhcrore in the next five years.

Driven by the growing demand for POL products IndianOil has ambitious plans to almostdouble its current installed group refining capacity of 80.7 MMT per annum (MMTPA) toabout 150 MMTPA by the year 2030. This includes greenfield refineries of IndianOilsubsidiary Chennai Petroleum Corporation Ltd. (CPCL) and the proposed Ratnagiri Refinery& Petrochemicals Ltd. (RRPCL) apart from numerous brownfield expansions.

RRPCL is proposed to be developed as the world's largest integrated greenfieldrefinery-cum-petrochemicals complex. It will be built by an Indian consortium consistingof IndianOil BPCL and HPCL along with Saudi Aramco and ADNOC.

Several pipeline projects with a combined capital expenditure of over Rs. 20000 croreare under implementation. Upon completion IndianOil's pipeline network would expand toabout 20000 km in length. A 69-km pipeline is also being laid to transport petroleumproducts to Nepal.

IndianOil has decided to infuse equity in Paradip Plastic Park Ltd a JV withIndustrial Development Corporation of Odisha to promote downstream plastics-based unitsnear Paradip Refinery. The Company has plans for setting up a Textiles Park in Odishabased on the feedstocks available from Paradip Refinery/Eastern India.

Looking at the future the Company is strongly focussed on offering a bouquet ofeco-friendly energy options other than liquid fuels to its customers. These would includenatural gas LNG CNG PNG autogas biogas Hydrogen and electricity.

The 5-MMTPA LNG terminal being set up by IndianOil at Kamarajar Port in Ennore hasachieved an overall progress of over 90% till now and would be commissioned by the end ofthe current year. In line with the growing requirement of gas the Company is bookingcapacities in other LNG terminals also both on the east and west coasts of India.

IndianOil is developing three natural gas pipelines – Mallavaram-

Bhopal-Bhilwara-Vijaipur Mehsana-Bhatinda & Bhatinda-Jammu through its jointventure companies. IndianOil is partnering in the development of a 1500-km natural gaspipeline grid in the Northeast to connect Guwahati to other major cities of all N.E.States.

IndianOil is currently operating City Gas Distribution (CGD) networks offering CNG forvehicles and PNG for households in nine Geographical Areas (GA) through two jointventures. Considering the growth potential in gas business the Company is aggressivelytaking part in the various bidding rounds for Gas.

The Company is also collaborating with fleet owners and automobile manufacturers topromote the use of LNG as transportation fuel.

During the year the Company's R&D Centre took up demonstration trials on thecountry's first Hydrogen fuel cell-powered bus in collaboration with Tata Motors. It hasalso set up a pilot plant to facilitate studies on conversion of carbon-dioxide tohigh-value lipids.

In sync with the expected demand for electric mobility IndianOil was the first companyto set up a fast-charging station at Nagpur during the year followed by one each at Delhiand Kolkata and two in Hyderabad.

Comprehensive trials are on with reputed partners to achieve better performance anddurability in lead-acid batteries and other energy storage applications as well assolar-to-green fuel technologies through the compressed solar power route.

For demonstration and scaling up of technologies developed in-house and for advancedresearch on alternative energy options nanotechnology etc. a second campus of theR&D Centre is coming up also at Faridabad. The first phase of technology deploymentfrom the new campus is expected from 2019-20.

Under IndianOil Start-up Fund 11 projects were selected for funding and incubation.The projects are being mentored by in-house domain experts along with National ResearchDevelopment Corporation.

Considering the global high-price oil scenario the Company is also looking at optionsfor part-substitution of transportation fuels with renewables. Petrol-ethanol blends arealready being marketed and the same can be extended to methanol. Options of vegetableoils dimethylether and methanol are available for blending with diesel.

The Company is in the process of setting up three plants in Gujarat Haryana and UPfor production of 2G-ethanol from lignocellulosic biomass like paddy straw corn-cobsetc.

IndianOil is working on a new model to produce bio-CNG from Methane and its applicationas a transportation fuel. For this biogas produced from waste/bio-mass sources like farmresidue cattle dung sugarcane press mud municipal solid waste and sewage treatmentplant waste would be utilised. This would also help utilise waste productively minimiseemissions and reduce pollution. The Company has signed MoUs with nine parties to retailBio-CNG through its marketing network.

IndianOil has tied up with National Agricultural Cooperative Marketing Federation ofIndia Ltd. (NAFED) for facilitating the setting up of plants to process bio-mass/bio-wasteto produce bio-CNG.

 

Hindustan Urvarak & Rasayan Ltd. (HURL) incorporated in June 2016 as a jointventure with Coal India Ltd. and NTPC for revival of the fertiliser plants located atGorakhpur (Uttar Pradesh) Sindri (Jharkhand) & Barauni (Bihar) has awarded LSTKcontracts for all the three projects. This has set the stage for commencement ofcommercial production of neem-coated urea from all the three plants by the beginning ofthe year 2021.

Besides overseas subsidiaries already operating in Sri Lanka Mauritius and UAE a newsubsidiary was incorporated in Singapore a branch office was opened in Myanmar and arepresentative office was opened in Bangladesh during the year. The Company hasestablished business ties with corporates operating in Bangladesh and Myanmar forcooperation in marketing and allied services for LPG and ATF respectively.

Corporate with a Conscience

IndianOil has taken many initiatives on the sustainability and CSR fronts also.IndianOil's portfolio of wind-power and solar energy has crossed 200 MW during the year.The Company has also been focussing on reducing its carbon and water footprints LEDlighting across installations rainwater harvesting systems and waste-to-energy processes.

IndianOil has commissioned three waste-to-energy plants each of 5 tonnes per daycapacity in Varanasi under Swachh Bharat Abhiyan. The electricity produced frombiogas generated by these plants is being used to power street lights in the vicinity.

The Company's Mathura and Gujarat refineries have begun preparations for using treatedsewage water from Mathura and Vadodara cities for plant operations in place of freshwater.

IndianOil has always been a corporate with a conscience focussing on education &skill development of unemployed and underemployed youth; drinking water & sanitationfor rural populace in far-_ung areas; health & hygiene through hospitals and medicaloutreach; etc. in its comprehensive CSR programme.

The Company's 200-bed Assam Oil Division Hospital in Digboi established in 1906 isequipped with modern medical facilities. It caters to a population of 2 lakh with thecatchment area extending to neighbouring Arunachal Pradesh and other nearby areas of theNortheast. The Assam Oil School of Nursing Digboi was established in 1986 to provideprofessional training in the field of nursing & midwifery to unemployed girls. TheAssam College of Nursing started functioning in the same premises in 1984 with intake of30 students in B.Sc. (Nursing) course. A 50-bed Swarna Jayanti Samudaik Hospitalset up by IndianOil in Mathura Uttar Pradesh provides subsidised medical assistance toresidents near Mathura Refinery.

IndianOil had set up a Skill Development Institute (SDI) in Bhubaneswar in 2015. Thefoundation stone for its permanent campus was laid by the Hon'ble President of India inMarch 2018. Besides regular courses connected with petroleum & petrochemicals sectorsSDI plans to offer skill courses in advanced technology areas such as ArtificialIntelligence Internet of Things Robotics Machine Learning Virtual/Augmented Reality3-D Printing etc. in collaboration with IIT-Kharagpur.

The Hon'ble President of India also inaugurated the Institute of ChemicalTechnology-Mumbai - IndianOil campus at Bhubaneswar. For this IndianOil has collaboratedwith ICTM to offer innovative programmes such as an integrated M.Tech. executive M.Tech.for industrial personnel as well as Ph.D. programmes.

As a special incentive to unemployed youth the Company engaged over 3500 apprenticesin technician trades during the year. They are being provided training and industryexposure for one year along with stipend.

The IndianOil Foundation a non-profit trust fully funded by IndianOil has developedtourist-friendly infrastructure and associated facilities at Konark Sun Temple in Odishawhich include a state-of-the-art Interpretation Centre that showcases the uniquearchitectural features of the UNESCO world heritage site.

Support to sports is yet another area where the Company has made a mark. Many of itsleading sportstars have shone at the Commonwealth Games-2018 in Australia bringinglaurels for India and IndianOil.

As part ofUjjwala Diwas IndianOil conducted 7453 LPG Panchayat eventspan-India and released 6.15 lakh new LPG connections. Over 1000 senior officers acrossdivisions participated as facilitators in the day's events that brought together LPGcustomers to discuss about safe and sustainable use of LPG.

Corporate success in the coming years will depend on understanding assimilating andusing cutting-edge technology efficiently. Accordingly IndianOil is revamping its ITlandscape to create a robust IT infrastructure and a digital Centre of Excellence. Besidespump-locator maps mobile apps and SMS services for retail customers an integratedportal mobile app and MIS system were developed for institutional/bulk consumers.

IndianOil is in the process of setting up an ambitious customer-facing portal designedto deliver next-generation customer experience and offer service/support across any lineof its business.

While technology will be a significant enabler in our business strategy the keydifferentiator will continue to be our human resource. Thus it shall be the Company'sconstant endeavour to address human interactions with care and sensitivity. TheCorporation's flagship Leadership Competency Development Programme Project Sakshamis creating new opportunities to make learning an ongoing process in the organisationbesides regular need-based developmental interventions at transition points. I am alsohappy to report that the Company is building e-learning platforms that will enable IOCiansto become independent learners and enhance their skill-sets and capabilities in order tobe future-ready.

Focussing on Trust as the ‘one thing that changes everything in business andlife' IndianOil is observing 2018 as the Year of Trust and encouraging allIOCians to not only internalise this core corporate value but also demonstrate it in fullmeasure in all their dealings both within and outside the Company. All our divisions aremaking synergistic efforts to co-create a flexible and agile corporate focussed oncustomer convenience and stakeholder value.

I look forward to the continued support and encouragement of all our shareholders inthis endeavour.

Sanjiv Singh

Chairman