Indian Oil Corporation Limited analyst Q&A

Thank you. We will now begin the question and answer session. The first question comes from the line of Probal Sen from ICICI Securities. Please go ahead.

Thank you for the opportunity and thank you for hosting this call, sir. Just a couple of questions. Firstly, on the refining business. It's very clear that if you normalize it for inventory, the GRMs actually declined a bit but just wanted to understand what was the contribution of Russian crude in overall sourcing in this quarter? And what is it so far in the first quarter of FY '26?

See, as far as Russian crude is concerned, we had imported 22% in '24, '25 for the full financial year. Although in the fourth quarter, it came down. It came down to almost 14%. But for the full financial year, it was 22%.

And have we seen an improvement in these numbers in this first quarter, sir, with the prices going down?

We have again seen the increase in the Russian crude availability, and we are hopeful that this year, in '25, '26, we should be touching around 24%, 25%.

Okay. The second question was with respect to the capital allocation plans that you mentioned about, the shift that is being driven to petrochemicals and renewables. In petrochemicals, however, what we have been seeing consistently over the last few years is that there just doesn't seem to be a shift to sustainable margins at least for -- from what we can tell. So how do you really look at the petrochemical margin environment? And what gives us the confidence that margins will actually improve enough that we can start making reasonable returns, given that our focus is increasingly shifting to the petrochemical segment for the next 5 years.

You must have seen our figures. Today, my petrochemical intensity is around 6%, which we want to increase to 15% by 2030 in the next 5 years. Already, we have announced the projects to achieve these targets. As far as margins are concerned, yes, margins are down, but it is a cyclical industry. And we understand that the cycle will come back. We can’t give any specific timeline, but the cycle is expected to turn around in the next 2 to 3 years. So the petchem margins should also improve by the time our new projects come up .

If I will be permitted, sir, let me ask it another way. If I can get a sense, what are the gross margins on a dollar per ton basis that we are seeing in our business today? And what is the kind of level we sort of would need for these investments to be profitable? If you can give us a sense on that.

See, all these are integrated assets . Whatever inputs are coming to these assets, Naphtha or whatever it is coming from existing stream. On an integrated basis, we -- see, we have 2 things. One is the cracks of the existing products and the cracks on the polymers, glycols, and LAB and PX/PTA. So today, the crack s on the petchem products are coming down , although on the refining side, the cracks are still okay. Even on the petchem side, you see cracks on polymers are okay, but PTA and glycols the margins are quite down. So as I said in the beginning, we don't have any specific numbers, but because it's a basket of many things, which makes things positive. So today, the petrochemical margins are down, but we expect that it will come back.

Thank you so much for the answers. I will come back if I have more.

Thank you. The next question comes from the line of Sumeet Rohra from Smartsun Capital. Please go ahead.

Sir, just a couple of questions. First, if you can -- firstly, your performance has been very commendable. So congratulations on that. You guys have done a very, very good performance in a very challenging environment. Sir, I'm just looking at overall profitability rather than on any quarter because the thing is that if we see that we reported approximately a profit of about INR13,000 crores, and this is after absorbing the LPG under recovery, which is of INR19, 0000 crores, INR20,000 crores. No, sir, of course, LPG is a controlled product and the government will compensate you on that. So sorry, can you please throw some idea on when we could receive the LPG money? And sir, secondly, you spoke about capex coming down from INR37 million to about INR33 million, INR34 million. Now sir, the matter of fact is that we always speak on capex. But can you also talk a little bit on earnings momentum? Because over the last couple of financial years, you have -- all of you have done very well so can we just get a sense on how do you expect earnings to shape up in the current year? Because now crude is also in our favor, right? I mean it's below $70 on a sustained -- hopefully, on a sustainable basis. So sir, can you please talk a little bit about how do you see profitability shaping up in a conducive environment of crude? My second question, sir, is on the retail outlets. So how many retail outlets do we have currently? And how many have we added and how many do you plan to add? And my last question, sir, is on GRM. So do you expect -- I mean, what do you expect in sustainable GRM scenario for the current year, sir?

Okay. Sumeet, I will take your question one by one. The first question was regarding the overall profitability for the year '24, '25. See, as you have said that we have given a very good profitability. As far as the LPG underrecovery is concerned, you must have seen that we have - - we are continuously engaging with the government. And we are hopeful that our continuous engagement with the government will give us positive results. The time and the quantum is not known, but it all depends upon many factors, geopolitical factors, other things which keep on affecting the oil marketing companies. As far as your second question is concerned regarding the next year's profitability or margin scenario. See, our profitability consists of 3 or 4 factors. One is the refining margins, which, as of today, is looking good. If you see on a day -to-day basis, the margins have come down drastically from '23, '24, but the margins are still reasonably okay. Marketing margins are positive and third is the pet-chem margins which are a little bit tightened up, but we think that the pet-chem margins will remain constrained in the coming quarters, but not for all the segments. For a few segments in pet-chem, it will be a constraint. So as far as '25, '26 is concerned, we hope that it should be a good year for the oil marketing companies and Indian Oil to be in particular. And as far as the third question is concerned, lets come to the GRM. So see, the GRM, if you see , the fourth quarter GRM is 7.85. And even after normalizing , it is a reasonable margin for the company. We expect refining margins to be pretty good for us going forward in this year. Now coming to the specific fourth question on the number of ROs. See, we have close to 40,000 retail outlets. And we plan to add almost 3,000 to 4,000 ROs in the current financial year. If you see 31st March, we had almost 40, 221 retail outlets. So we plan to add another 3,000 to 4,000 in the current year.

The next question comes from the line of Yogesh Patil from Dolat Capital.

And congratulations for the good set of numbers, sir. Sir, I wanted to check, is there any oil products inventory gains during the quarter? And I also wanted to know your gross marketing margins on other oil products, excluding petrol diesel and LPG was it better during the quarter compared to the last quarter?

See, yes, in the quarter 4, we had inventory gain, and that has helped us to report better numbers this year. As far as your second question is concerned, whether the margins on other marketing products other than MS, HSD, ATF are concerned, yes, the margins were better in the quarter 4 vis-a-vis earlier quarters.

Sir, could you please share the inventory gains on the oil product side, if you have any number handy?

See, as I told you that we had inventory gains. And other products, see, we don't calculate inventory gains on product -by-product basis. It's a consolidated figures. But the margins have improved for other products.

Sir, my second question is related to our refinery expansion plans, Panipat, Koyali, Barauni can you provide us a physical completion commissioning time line? And if you can give us some idea about the actual earnings growth from these 3 incremental refining capacities that would be helpful?

See, if you see in Panipat we are adding 10 MMTPA. We are going from 15 to 25. In Gujarat, we are going from 13.7 to 18, which will add another 4.3 MMTPA. And Barauni we are going from 6 to 9. So we are going to add another 3. So we are adding almost, you can say, 18 MMTPA in our system, okay? Now as far as commissionings are concerned, both Panipat and Gujarat are expected to come in the fourth quarter of '25, '26. And it will mostly stabilize in '26, '27. As Barauni is concerned, it is expected to come in the first quarter or second quarter of '26, '27. Today, all the refineries have already achieved a physical progress of more than 80%. So we are going in a very good targeted speed to achieve the targeted commissioning dates. And the expected revenue from all the new commissioning would definitely depend upon the refining margins prevailing at that point of time. So I would say that whatever refining margins would be there, they will certainly support the returns on investment from these projects.

And sir, lastly, can we expect any overall GRM improvement due to the incremental capacity addition in all these 3 refineries?

Yes, definitely. Whatever the refinery expansion, whatever extra throughput I will earn, it will definitely add to my refining margins in absolute numbers.

And lastly, sir, post completion of incremental refining and the petrochemical capex, what would be the peak net debt-to-EBITDA ratio? Any ballpark number you have in mind?

It will be very difficult to quantify in EBITDA percentage terms. But see, today, I'm at 70 MMTPA. And if I am adding another 18 in my system. So it will become 88, 89. And then we have CPCL also with us. So all put together, my refining capacity will go beyond 100 MMTPA.

The next question comes from the line of Sabri Hazarika from Emkay Global Financial Services.

Sir, 2 questions. First one is on the inventory side only. So I just wanted a number, I think last year, INR1,686 crores was the total inventory gain for the company. So versus that in FY '25, what would be the number FY24 number INR1,686 crores?

See, as far as my full financial year is concerned, still had an inventory loss.

Yes. And how much would it be?

Quarter 4 I had inventory gain but on the full year, I still had inventory loss.

And what would be the figure?

Yes. But any ballpark number because it is a reported figure because you have been giving it, I think. So that's why I'm asking?

We have already shared these numbers. You can see from one of our statement which we have given.

Okay, sir. Okay. Fair enough. And secondly, on the project side only. So you mentioned about the refinery expansions so all these expansions have got polypropylene you need also sir that would also be simultaneously commissioned or that could be later, actually?

Let me see. Polypropylene is coming. It is independent of this. And see, as I said in the beginning also, apart from the refining expansion, we are also targeting the Petcam expansions going forward. And I gave the numbers also. From 6% Petchem intensity, we will reach 15%.

I can understand. I mean the polypropylene unit commissioning will also be at the same time that you gave regarding the refinery expansion or that will afterwards?

Yes. Commissioning 1 or 2 months here and there, it will be happening at the same time.

Okay. Fair enough. And regarding some other projects, so you have that acrylic project in Gujarat. When is that expected to commission? And what about the Paradip refinery PX-PTA project, what is the timeline for those 2?

As far as that is concerned, Oxo Alcohol Project in Gujarat is expected to commission in -- it is already commissioned. Oxo Alcohol Project in Gujarat, it is commissioned in the month of May.

May, right. And PX-PTA of Paradip refinery.

PX-PTA will be in April '26.

April 2026, right. And beyond that, we have got this big Paradip Petchem complex, which you have signed an MOE. I think the Stage 1 approval was done , INR61,000 crores. So what is the timeline for that actually? So I think Stage 2 approval is still pending, but any timeline you want to give for that?

See, Stage 1 was given in the '23 -- March '23 and the approximate cost is INR61,000 crores. And the commissioning schedule, what we have is approximately 54 months from the date of investment approval. So it is too early to say, but yes, it will take 4.5 years from '23. So somewhere around '29, '30, it will happen.

Okay, sir. And beyond this, there is no other Petrochemical project major ones, right, other than this?

See, recently, we have -- as a Board, we are discussing a few of the projects. But definitely, a few of the new announcements you will hear very soon, because we have another polypropylene unit at Barauni coming in '26 -'27. Then we all have polypropylene units in the expansion category. Then we have PX-PTA Paradip, which is coming almost for INR14,000 crores in end of this financial year '25 -'26. And then we have another 2, 3 projects of polybutadiene rubber which is coming in '26-'27 .

This is the Panipat one, right? The Styrene Monomer, right? That's what you're talking about?

Yes.

Okay. FY '27.

But we have few other projects coming very soon, you will soon be hearing a few new expansions in Petchem.

Okay. Some more announcements will come you are saying, right?

Yes.

And on pipeline, any -- that Ennore Tuticorin, that is largely ready or that is also some part is pending right now?

Which one?

The Ennore Tuticorin, that big pipeline project in Tamil Nadu?

I think it is completed.

It is also completed, fully connected, right?

Yes.

The next question comes from the line of Achal Shah from Ambit Capital.

Sir, I just wanted to know, so what is the current under recovery per cylinder? And what is the future outlook? Like do you feel this under recovery will continue after the INR50 price hike?

See, it keep on changing, but today, it is around INR170 per cylinder.

The next question comes from the line of Nitin Tiwari from PhillipCapital.

Sir, my first question is with regards to capex. If you can help us with a breakup of the capex between different segments for FY '25 as well as FY '26, the projections that you've given?

As far as the capex is concerned, we are targeting INR 34,000 crores in '25-'26. And if you see refining and pipelines put together, it should be somewhere around INR17,000 crores. So almost 50% will go towards the refining and pipeline and remaining will be on marketing segments, Petchem and other investments what we have announced.

See, on a ballpark figure, I would say, we will spend around INR7,000 crores to INR8,000 crores in marketing. And Petchem, we should be spending around INR3,000 crores.

And in CGD, sir?

CGD is basically, we are doing a lot through joint venture companies and it should be somewhere around INR500 crores.

And FY '25 capex would be in similar ballpark what you indicated for '26, '25 would be similar? Or if you can give us some specifics around about '25 as well?

We have the firm plans for '25-'26 as on date. '26-'27 should be also…

No, I was referring to the already -- the year already gone by FY '25, '24-'25. If you can give us a breakup in terms of how much you spend in each segment.

See, '24-'25, we have spent almost INR38,000 crores in that.

Right. And how much of that was in refining?

Refining and pipelines put together was almost INR20,000 crores.

And sir, out of this INR20,000 crores, how much was expansion capex and how much was regular maintenance?

It is very difficult to say . But mostly, we are spending maximum money nowadays on the expansion.

Okay, sir. And sir, my next question was related to Petrochemical. I think one of the participants also asked on a similar line. So just wanted to understand that are we breaking even in Petrochemical, if we look at in pre -depreciation terms? Are we like EBITDA positive in Petrochemical or we are EBITDA negative as well? Because EBIT number is something which you have given out in your press release. I was wondering if like we are EBITDA positive or not?

No, we are definitely EBITDA positive in Petchem.

So we've reported about INR200 crores of loss at EBIT level in Petchem. So what would be the EBITDA number roughly, sir? Or if you can represent the depreciation number. So sir, we have a ballpark understanding of where we lie in terms of Petrochemical margins.

See, we would be EBITDA positive INR1,000 crores for '24-'25.

Petchem EBITDA is around INR1,000 crores is what you're saying, right?

Yes.

Those will be two. If I may ask one more. Crude oil prices have corrected quite meaningfully. So is it the right understanding that that will help release some amount of working capital, if you can give us an indicative number s how much of debt reduction could happen if our working capital goes down and because if crude remains where it is?

See, definitely, reduction in crude oil prices helps us to reduce our working capital, definitely. But definitely, it should be in the range of maybe INR10,000 crores it will help us . If the reduction is as high as what we are seeing today, by $10 per barrel, then it should be around INR10,000 crores.

I mean you're saying that $10 per barrel would roughly lead to a INR10,000 crores saving in working capital and accordingly a reduction in debt, right?

Yes.

The next question comes from the line of Ritik Jain from Nirmal Bang.

Yes, sir. Congratulations for a good set of numbers. My first question is on the sales volume of CGD gas in 4Q FY '25 and FY '25?

See, as far as numbers of CGD is concerned, we are becoming better day by day. Out of 26 GAs already 6 GAs have become EBITDA positive. And by next year, we hope that we will have another 7 to 8 GAs which will be becoming EBITDA positive. As far as sales are concerned I had a sales of almost 115 TMT of CGD.

In Q4 FY25?

Yes, '24, '25 yes. .

So this is for full financial year, sir?

Yes.

And the outlook for sales volume and EBITDA per SCM for FY '26, sir?

As I shared with you just now that we will be becoming EBITDA positive for further GAs. And on an overall segment basis also, we will be EBITDA positive from next year..

Okay. And what was the reason for the decline from gas segment EBIT in Q4 FY '25?

I don't think we had a negative -- gas profitability has gone up significantly. We have witnessed almost a 50% jump in the profitability from the gas segment this year.

I will come back in the queue if there is any questions.

Thank you. The next question comes from the line of Sumeet Rohra from Smartsun Capital. Please go ahead.

Hi, sir. Thanks for the opportunity. Sir, just a couple of things. I was basically just wondering from now from an investor point of view that our dividend payout in absolute number of rupees has been lower this year because of the LPG under recovery money that we've not received which has hampered profitability. So sir, is it safe to assume that when -- once you get the LPG under recovery from the government, investors can expect a dividend payout which was similar to FY '24 levels? Because anyway, 53% of the one money goes back to the government itself. So can we expect that? And sir, secondly, on the LPG part as well, if I remember the honorable oil minister had mentioned that prices will be reviewed on a 30-day basis or slightly lower on a fortnightly basis. So do you get the early sense that we could be entering an era of LP G prices could be market aligned and then eventually decontrol. Any thoughts on that, sir?

Yes. As far as the dividend is concerned. In the past 10 years, you would have seen Indian Oil is one company which has always been giving very reasonable dividends to all its stakeholders. So in the last year, since the profitability was very good we declared a very high dividend. This year, based on my profitability, I've again given a reasonable dividend to the shareholders. As far as second question is concerned about your LPG under recovery, I don't have a specific answer that what would be the government policy on that. But definitely, we keep engaged with the government to monitor our LPG prices.

No, sir, because the only reason why I ask this is because since it's a controlled product and we are basically -- so it's kind of not a sustainable model where we keep bearing the LPG board in. So that's exactly why I was thinking on those grounds?

No, your concern is well noticed and we have been continuously, all the oil marketing company gets engaged with the government to see what would be the quantity and quantum and timing to get these under recoveries. .

Okay. Sure, sir. Thank you so much.

Thank you. The next question comes from the line of Yogesh Patil from Dolat Capital. Please go ahead.

Thanks for taking my question sir again. Sir, as per the latest news flow, U.S. crude imports have gone up for the India. Just wanted to understand how much quantity of U.S. crude IOCL can process considering economic benefits SMEs?

See, yes, you are true that in '23, 24, we almost process 4% crude vis -a-vis 9% what we did in '24-'25. But it is absolutely on an economic basis. As a system, we don't have any targets to process any specific crudes. For us, any crude is equivalent depending upon the price at which it is available to us. So on an optimization level, whatever crude enter through tendering system, it is being procured by the company. So we don't have any specific targets for any type of crude in the system.

See, this is what I said that no crude is having any benefit to us. Any crude which comes in has to justify on the basis of the best crude available on that particular day to us. So once we come out with the offers, many people compete with each other whether it is West African crude, Middle Eastern or U.S.. So it has to compete and then come into our system. So –as long as it is not beneficial to us, we don't procure anything.

Sir, lastly, considering the capex run rate of INR33,000 crores, INR34,000 crores per annum for next few years and a reasonable dividend payout. What should be the minimum marketing margins on the -- mostly on the petrol and diesel side? Have you calculated anything that should be the minimum so that the capex can be funded through the internal cash flows and the early dividends would be there. So any number, ballpark number which you can share?

See, you have to understand all the companies working on an RTP basis. See, for the marketing - - even the marketing group of ours, they procure the goods on RTP basis from our own refinery. Whether we process the crude from our own refining system, marke ting will have to earn its own marketing margin. And there is a structured system for incorporating the marketing margins in our pricing. So if the prices remain what is today, we should be having a reasonable marketing margins on all our products. So it is very difficult to indicate a level, definitely all the oil marketing companies should earn a reasonable marketing margin. And as on date, if we talk about we have a positive marketing margins.

Thanks a lot, sir.

Thank you. Ladies and gentlemen as there are no further questions, I would now like to hand the conference over to Mr. Varatharajan Sivasankaran to give his closing comments.

Floor to the management for their closing remarks. I had one small question, sir. On the Barauni Refinery you had announced increase in capex cost. So should we assume that like on Panipat and Koyali you don't have an increase in capex cost. So should we go with the original cost?

See, we have revised the cost of both Panipat and Gujarat a few months back. So whatever the latest achievement the management has approved,commissioning is happening according to that. So Barauni has come this time.

Okay, sir. Fair enough. So the floor is yours for your closing remarks.

Yes. Thank you all for your time and insightful questions. On behalf of the entire management team, thank you once again for your continued trust and support. We look forward to engaging with you in our future interactions and keeping you updated on our progress. Stay safe and take care, Jai Hind, Jai IndianOil.

Thank you, gentlemen. And on behalf of Antique Stock Broking Limited that concludes this conference. You may now disconnect your lines.