Indian Oil first quarter 2017 net profit falls 45 per cent to Rs 4548.51 crores on lower refining margins

Oil major Indian Oil first quarter net profit dipped by 45 per cent to Rs 4,548.51 crore as against ₹8,268.98 crore in the corresponding period of FY17. Chairman Sanjiv Singh said: “There was an inventory loss of ₹2,033 crore on crude oil and a loss of ₹2,009 crore on finished products during the quarter. Comparably, there was an inventory gain of ₹3,785 crore on crude oil and ₹3,695 crore on finished products during the same quarter of last fiscal.

There is a lag of at least 60 to 75 days from crude oil procurement to coming out with finished petroleum product. Any fluctuation in oil and product prices during the period has a bearing on the company’s refinery margins.

The gross refinery margins (GRMs) for the company stood at $4.32 per barrel for the latest quarter. Comparably, the GRMs were at $9.98 per barrel in Q1 FY17.

IndianOil Director (Finance) AK Sharma said the GRM without inventory loss stood at $6.44 a barrel this quarter, against $3.56 in the previous year period.

The company has also been incurring an input credit impairment due to the non-inclusion of certain petroleum products under the GST regime. Sharma said: “We have already said that the annual input credit impairment is to the tune of ₹5,000-6,000.”

The GST regime kicked in from July 1 this year, and the credit build-up has started to worry oil companies. Singh said IndianOil is working towards lowering the hit. “We are in talks with State governments to allow us a value added tax deferment to prevent the input credit from stranding,” he added.