| IOC chairman Sarthak Behuria (centre) and general manager (R&D) R.K. Malhotra (right) in New Delhi on Tuesday. Picture by Ramakant Kushwaha
New Delhi, March 7: Indian Oil Corporation expects to maintain last year’s profit level of Rs 4,800 crore in the current fiscal as oil bonds worth Rs 6,300 crore are set to flow into its kitty this month, chairman S. Behuria said today.
Moreover, IBP, a subsidiary of IOC that has also piled up losses, is likely to get oil bonds worth Rs 400 crore.
IOC, a company with a huge turnover, had plunged into the red for the first time during the first quarter of the current fiscal. It had suffered a loss of Rs 54 crore.
Behuria said cash-strapped IOC would sell these bonds in the market to raise funds to meet its tax obligations and repay debt. IOC had accumulated a debt of Rs 22,000 crore in the current fiscal, Behuria added.
Oil companies had to take recourse to heavy borrowings to meet their working capital requirements as they have been buying crude at phenomenal rates and have not been allowed to raise the prices of petroleum products to cover up the costs. This has resulted in huge under-recoveries.
The government had announced in September that it would issue bonds to the oil marketing companies to cover up the losses in LPG and kerosene. However, the oil bonds are being issued only in the last month of the current fiscal.
Petroleum minister Murli Deora met finance minister P. Chidambaram yesterday and asked him to release the bonds by the middle of this month so that the oil companies get a chance to clear up their balance sheets in the current financial year.
“After having sustained a combined loss of Rs 9,700 crore in the first nine months of the current fiscal due to state-controlled retail prices, coupled with globally spiralling oil prices, we expect to better our net profit in the coming months,” Behuria said.
He also said IOC had drawn up a capital expenditure of Rs 7,000 crore during 2006-07 to set up a naphtha cracker unit and expand its refining capacity and pipeline network.
IOC had sold half of its cross-holding in GAIL (India) Ltd last week to raise Rs 561 crore as it was in urgent need of cash.
In December, the company board had approved the sale of up to 20 per cent of its stake in ONGC and up to 50 per cent in GAIL during the current fiscal.
Behuria said IOC’s shares in ONGC would be sold at an opportune time depending on the ruling stock price. He said IOC would not rush to sell these shares this fiscal as the bonds would improve its financial position.
IOC had a 4.83 per cent stake in GAIL, which amounted to 40.8 million shares. The downstream oil major also has a 9.61 per cent stake in ONGC with an entitlement of 13.7 crore shares.
“The sale of the GAIL equity, coupled with refining discount, subsidies from upstream companies and dividend earning, will enable IOC to maintain its profits at the last year’s level,” he said.
GAIL also owns a 2.4 per cent stake in ONGC. The government had raised Rs 4,643 crore by selling the shares of these companies to each other in 1999 to reduce its fiscal deficit. The stock price of the shares has shot up since then and the 9.6 per cent stake that IOC holds in ONGC is valued at Rs 14,000 crore. The company had paid only Rs 1,371 crore for these shares.