Adjusted for multiple provisions related to entry tax and employee expenses, IOCL’s EBITDA was well above our estimate mainly driven by a large beat in refining. Large inventory gain — somewhat surprising given the crude movement in Q4 — helped but core GRM also appears to have been higher.
Petrochemical earnings also surprised positively. However, marketing earnings disappointed against our expectation.
There were multiple provisions related to entry tax and employee costs in IOCL’s Q 4 results. Adjusted for these one-offs, EBITDA was well above our estimate mainly driven by a large beat in refining as the company reported a GRM of $9/bbl vs our expectation of $4.5/bbl.
The difference was partly on account of inventory gains of $2.1/bbl in the quarter vs our expectation of a inventory loss; but even adjusted for this core GRM of $6.9/bbl has been strong vs $5.1 in Q3. Improvement in profitability at Paradip refinery is a possible reason. Petrochemical earnings also beat our estimate. Adjusted for inventory and forex gains and other one-offs, there appears to have been a significant miss in marketing earnings.
Subsidiaries and associates contribution to EBITDA and net profit declined marginally y-o-y for full year FY17, which was surprising given better performance by both CPCL and PLNG, which have both declared results.
In addition to the Rs18/share interim dividend already paid, IOCL announced a final dividend of Rs1/share, taking full year pay-out to over 45% vs 30-40% historically.
Indian Oil Corporation Limited is India’s largest oil marketing and refining company and is majority owned by the government of India. It has ~50% market share in retailing of petrol and diesel. It has total refining capacity of 54 MMT with another 15MMT expected to be commissioned soon. It also has a majority stake in CPCL, a smaller refining company.