IOC reports Rs22,451 crore loss, biggest ever by any listed company

Indian Oil Corp (IOC) today posted the nation's biggest quarterly net loss of Rs22,451 crore after the government failed to compensate it for capping auto and cooking fuel prices.

Simultaneously, Hindustan Petroleum Corp Ltd (HPCL), the nation's third largest fuel retailer, also posted a net loss of Rs9,249 crore in April-June, the second biggest quarterly loss by a listed corporate.

The government has in the year year not compensated oil firms for selling diesel, domestic LPG and kerosene below cost this year as the Rs40,000 crore fuel subsidy it had budget has all been exhausted in paying compensation for last fiscal.

Bharat Petroleum Corp Ltd (BPCL), India's second largest fuel retailer, will report quarterly earnings tomorrow and is likely to post over Rs9,000 crore of net loss.

IOC, which like other retailers is living off borrowed money, warned that it may soon exhaust the limit to which it can take debt and sourcing crude oil (raw material for making petrol, diesel and other petroleum products) would become difficult as international sellers don't give credit.

The three state-run fuel retailers are losing about Rs710 crore per day on selling diesel, domestic cooking gas (LPG) and kerosene at government controlled rates which are way below market price.

Besides, the government's "inflationary concerns" have not allowed them to raise price of petrol - a fuel that was deregulated in June 2010 - even though they are losing over Rs3 per litre.

IOC Chairman R S Butola said the government should realise that oil firms are on the brink and fuel subsidies need to be addressed urgently.

The three fuel retailers are projected to lose a record Rs177,715 crore this fiscal as they sell diesel at a discount of Rs12.13 a litre to its cost, kerosene at Rs28.54 and LPG at Rs231 per 14.2-kg cylinder discount.

The government, which is struggling to contain budget deficit and runaway inflation, has not just failed to compensate state-run retailers for selling fuel below cost this fiscal but also not provided about Rs10,000 crore of the promised subsidy for 2011-12.

What has made matters worse is rupee's slump against the US dollar, making import of crude oil costlier. The nation relies on imported crude to meet is almost 80% need.

"We had a net loss of Rs22,450.95 crore in April-June quarter as compared to Rs3,718.70 crore loss in the same period a year ago," Butola said.

This was primarily because IOC was not compensated Rs17,485 crore for selling diesel, domestic LPG and kerosene at a discount to its cost and another Rs950 crore lost on selling below its cost.

The delay in getting compensation has increased PSU oil firms' interest payments on debt they have taken for buying crude oil among other things.

IOC's borrowings have gone up by a masive Rs15,000 crore in the April-June quarter to Rs90,923 crore.

The company can borrow a maximum of Rs110,000 crore and if losses on fuel sales continue that borrowing limit will soon be reached, after which it will not get any finances impacting the company's ability to buy crude oil from international markets, he said. The company's debt-equity ratio has deteroriated ato 2.57:1.

Also, its capital expenditure will have to be pruned.

"As of now capex funding has been tied-up. Overall, if financial constraints continue to play in remaining part of the year, there is bound to be impact," he said.

Shares of IOC fell 1.8% to Rs251.60 at the close on BSE, the lowest level since June 19.