25% US tariff may affect Iran's Chennai Petroleum Corp dividend claims

Fresh US tariffs on Iran may hit dividend flows to CPCL's Iranian shareholder, though operations stay insulated as the refiner deepens retail foray and expansion plans

The imposition of 25 per cent tariff by the United States (US) on countries doing business with Iran may not have any operational or financial impact on Chennai Petroleum Corporation Ltd (CPCL), but it may hit dividend claims of over ₹100 crore of National Iranian Oil Company (NIOC), which holds a considerable stake in CPCL, according to sources. 

“The crisis will not cause any financial or operational concerns for CPCL, as CPCL stopped Iranian imports once sanctions were reintroduced in 2018. The company also negotiated with insurance players, solving insurance premium concerns too,” said a source aware of the development. 

The sanctions may cast a shadow on the ability of the NIOC to claim CPCL's dividends to the tune of over ₹100 crore lying unclaimed in various Indian banks for over four years now. According to industry sources, if a dividend is left unclaimed for more than seven years, the amount is transferred to the Investor Education and Protection Fund (IEPF). 

Sources said that CPCL’s partner — Naftiran Intertrade Company, a Swiss-based trading arm of NIOC — which currently holds around a 15.4 per cent stake in the Chennai-based company, may be facing dividend woes. 

CPCL, an arm of the country's biggest refiner, Indian Oil Corporation (IOCL), was originally incorporated in 1965 as Madras Refineries Ltd — a joint venture involving India, AMOCO (American Oil Company), and NIOC. AMOCO exited the venture in 1985.  IOCL holds 51.89 per cent stake in CPCL. 

Iran used to be India's largest supplier of crude oil after Saudi Arabia in FY10, but by FY20, the supplies came down to half, owing to US sanctions. Since then, CPCL has also had no imports or trade deals with Iran. The company had reportedly stopped processing Iranian crude way back in October 2018. 

According to CPCL’s website, Naftiran has two board members in CPCL. The crisis will not have any impact on the upcoming 9 mmtpa refinery and petrochemical project at the Cauvery Basin at Nagapattinam in Tamil Nadu, at an estimated cost of around ₹36,000 crore. 

Entering fuel retail biz 

CPCL is already in the process of foraying into the fuel retail business, as a strategy to insulate itself from crude price uncertainties. 

It has taken a licence for around 300 outlets with an investment of around ₹400 crore, and the outlets will be spread pan-India. To start with, they will be across Tamil Nadu, Kerala, Puducherry, Karnataka, Maharashtra, Uttar Pradesh, Telangana, Goa, Gujarat, Haryana, and Andhra Pradesh. The retail outlets will have a separate brand, logo, and service concept. 

In the full 2024–25 financial year, crude oil processing at 10.45 million tonnes (Mt) was lower than the 11.642 Mt processed in the previous year. 

Due to refining margins falling on softening global oil rates, its net profit dipped to ₹173.53 crore in 2024–25, from ₹2,711.25 crore in 2023–24. The company earned $4.22 on turning every barrel of crude oil into fuel (refining margin) in FY25, down from $8.64 per barrel in the previous year.