Indian Oil Corporation 04

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INDIAN

OIL

CORPORATION


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INDUSTRY OVERVIEW

Indian Oil& Gas Sector US$ 110 billion industry

6th largest consumer of petroleum products and expected to be at 4thposition by 2010 (source: IBEF)

Indian crude demand 130 MMTPA

30% Domestic70% Imported

19 Refineries Capacity of 177 MMTPA

Refining capacity expansion planned over 5 yrs. Is over 60%

Approx. 7 lakh people employed in the oil & gas industry

1.58 lakh kiloleters of fuel dispensed from retail outlets every dayamounting


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COMPANY

BACKGROUND


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COMPANYBACKGROUNDIndian Oil Corporation at a Glance

Ticker IOC

Number of Shares 209934345

Promoters Holding 80.50%

Market Capitalization (Rs.In crores) Rs.48135.10

Employees 31945

Refinery Capacity (in MMTPA) 60.20

Retail Outlet (including IBP) over 32,500


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Shareholders Pattern

1%

6%

9%

3%

81%

Promoter Institution Bdy Corporate

Individuals Others

Refining Market Share

15%

9%7%

22%

7%40%

IOCL BPCL HPCL ONGC RIL ESSAR

Market Share Of Major Players

3%

49%

21%

9%18%

IOCL BPCL HPCL RIL OTHERS

Market Share in Pipeline

47% 7%

16%

30%

IOC L ONGC HPC L BPC L

COMPANYBACKGROUND


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COMPANY BACKGROUND

IOCL is a public sector undertaking formed in1964 through the merger of Indian Oil CompanyLtd. and Indian Refineries Ltd.

18

th

largest petroleum company in the world. Major supplier to Defense forces, Railways,

STUs(army-96%; navy-100%; Airforce-90%; STUs-87%; Railways-84%).

Only oil company to operate in every part ofIndia.


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BUSINESS

ANALYSIS


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ONLY COMPANY TO HAVE PRESENCE IN HIGH

CONSUMPTION NORTH AREA


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UBIQUITOUS PRESENCE

Marketing:Market shareOf 45%; 55% of industry

infrastructure

Petrochemicals:

Operational Lab &Px/PTA Plants

E&P: Forays In India& Overseas

Gas: Sourcing &marketing

Refining: 10 Refineries;Refining market share of 40%

Pipeline: 9273 kms pipeline(crude & product)


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PRODUCT PROFILE

CRUDE

FURNACE

VACCUM

UNIT

Butane & Lighter

Naphta

Gasoline

Kerosene

Light Gas Oil

Heavy Gas Oil

Residue Fuel Oil

SGU/LMU

NHT/CCR

KMU/DHDS

DHDS

FCCU

VSU

90-220F

220-315F

315-450F

450-650F

650-800F

800+F

DISTILLATION

TOWER

(Crude Unit)

LPG 3.70%

MS- 17.40%

ATF/SKO-4.50%

HSD-40.70%

BITUMEN-1%

FO-32.70%


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BUSINESSMODEL

ALUEPROPOSITION: offerpetroleum products likepetrol, high speed diesel,naphta & lubricant.

COSTSTRUCTURE :rawmaterial is the majorcomponent of the cost italmost incurred 81% oftotal cost followed byinterest and staff cost.

CUSTOMERRELATIONSHIP;company maintain longterm & cordialrelationship with hisclientsCUSTOMERSEGMENTS:fuels to mostof the sectori.e.automobileaviation etc.

ACTIVITYCONFIGURATION; hightech infrastructure withon line automatic qualitycontrol ensures qualitycheck

CORECAPABILITIES:strong and wellestablishedmarketing &distributionnetwork,favorablecoverage ratiosprovides supportto its creditprofile.

PARTNERNETWORKMajor partnersrailway,automobilesectorinfrastructure

REVENUESTREAMS; companyrevenue comes fromwide variety ofpetroleum productsand special petroleumproducts.

CUSTOMEROFFER

FINANCE

DISTRIBUTIONCHANNELS; companyhas strong nationwidedistribution networkwith 88329 retailoutlets.


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STRATEGIES TO FACE DOWNTURN

Entering into new business segment of city gas distribution

Able to earn revenue through other business activity Planning to invest aggressively in petrochemical sector

Initiating research in new frontiers (such as residue gasification coal-to-liquid, gas-to-liquid, alternative fuels, synthetic lubes, nano-technology,etc.)

Planning to enter in retail business through opening retailoutlets at prime location petrol pumps

Investing in oil bonds to decrease debt level

180 new & cost effective product formulations developed

Indalin+ technology for conversion of Naphtha to LPG/MS Creating Unique Selling Points in all customer segments

Expanding the non-fuel business to improve cos. bottom line

Marketing of alternate fuels and maintaining productdifferentation


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PERFORMANCEANALYSIS


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REFINING: ANNUAL OPERATING HIGHLIGHTS

Gross Refining Margins $/bbl

5.3

6.2

4.6 4.2

9.02

3.37

0

1

2

3

4

5

6

7

8

9

10

FY04

FY05

FY06

FY07

FY08

Apr-

Dec08

$

Capacity Utilization

104100

85

90

95

100

105

FY08 FY09

%

Refinery Throughput

47.4

62.3

0102030405060

70

FY08 FY09

MMT


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OPERATIONAL PERFORMANCE

Sales & Sales Growth

0

200

400

600

800

JAS

07

OND

07

JFM

08

AMJ

08

JAS

08

OND

08

Rsbn

-100102030405060

%

Sales Sales Growth

Trend of PBDIT & OPM

-100

-50

0

50

100

150

200

JAS07

OND07

JFM08

AMJ08

JAS08

OND08

Rsbn

-10

-5

0

5

10

1520

25

30

35

%

PBDIT OPM

Fall in sales due to decrease in

domestic demand as well as exportduring Oct 08 to Mar 09

Due to increased crude prices and

increasing under recovery,

company has to reduce production

Lowest GRM in previous 5 yrs

leads to decrease in OPM

High cost of fund keeps pressure

on operating profit

Non-revision of selling price also

leads to fall in operating profit


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FINANCIAL PERFORMANCECost Structure as % of Sales

0

10

2030

40

50

60

RM Traded

Goods

Staff Depn Interest Other Tax

%

2007-08 2008-09

PAT & NPM

-80

-60

-40

-20

0

20

40

60

JA S0 7 OND0 7 JFM 0 8 A M J0 8 JA S0 8 OND0 8

Rs.

(in

bn)

-10

-8

-6

-4

-2

02

4

6

%

PAT(LHS) NPM (RHS)

D/E Ratio

0.7

0.75

0.8

0.85

0.9

0.95

2005-06 2006-07 2007-08`

Cost as a % of sales has increased

due to high material cost because of

high crude prices and increase inother expenses

PAT has declined from the previous

year due to heavy increase in under

recovery during 1st half of FY09 and

so it keeps pressure on NPM

Trend of Dividend Payout

0

20

40

60

80

100

120

140

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

%

Continuous dividend payment policy

taken by the company


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PROFITABILITY RATIOS

FY05 FY06 FY07 FY08 FY09

OPM

NPM

ROAvg.NW

ROAvg.CE

5.32

0.1314.8315.7114.4918.47

-13.9419.5420.5916.1819.62

4.46 4.97 4.56 -3.40

2.78 3.43 2.78 0.023.48


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CAPITAL MARKET PERFORMANCE

Under performed during half of FY09 because of high crude

prices Sensex falls 40%, O&G falls by 33% whereas IOCL has fallen

by 13%. Beta of stock is 0.60.

Relative Strength Index

0

20

40

60

80

100

120

1April

2008

25April

2008

21May

2008

12June

2008

4July

2008

28July

2008

20August

2008

12

September

2008

7October

2008

31October

2008

25

November

200819

December

2008

14January

2009

6February

2009

3March

2009

27March

2009

Sensex O&G IOCL


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WAY AHEAD

Governmental action in formulating a viable market related pricing policy

Rationalization of duties and taxesmove towards GST regime

Planned set up off retail outlets to justify long term viability-planned township.

Evaluate options for retail outlets as receiving and storage points instead ofonly sales pointsWarehousing facilities, Receipt points for NFRs etc.

Generate additional revenue and margin streams from Alternate Fuels CNG,

Auto-LPG and Bio-Fuel

Companys revenue will grow after operation started at Panipat refinery

Company is diversifying its business through entering into city gas distribution

segment


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ISSUES AND CONCERNS

Volatility in crude oil prices.

Government controlled prices.

Rupee Fluctuation.

Lack of necessary infrastructure.

Depleting fuel resources.

Rising bad debts.

Delay in projects.

Cost of oil rigging is high.


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CHALLENGES FOR COMPANY

Company is considering entering into other energy sub-sectors to

compliment its own line of business.

Optimization of refining processes.

Logistics & supply chain management.

Timely execution and safe commissioning of project.

Consolidation of retail and direct consumer businesses through better

offerings than competitors.

Retention of skilled manpower.

Enhancing profitability.


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REFINERY BUSINESS: Set TO DeliverStrong Value

Strategic Location, Proximity

To Materials, Access to End

Markets

Refining Industry Outlook

Remains Strong

India Emerging as a Global

Refining Hub

Leverage Existing Project

Execution Capabilities and

Infrastructure

Market Leader in Downstream

Economies of scale Benefits

High Complexity, Cost

Competitiveness,

Product Flexibility and High

GRM Potential


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Indian Oil Corporation 04

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