Indian Oil Corporation Ltd Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Probal Sen - ICICI Securities - Analyst : I think two or three questions. Firstly, as far as the Russian crude situation is concerned, just wanted a sense of how much percentage of our crude sourcing in Q3 was from Russian crude and at what discount to benchmark, if that can be shared? And what is the Q4 situation looking like at this point in time?

Question: Probal Sen - ICICI Securities - Analyst : Got it. The second question, sir, is it possible to share the inventory impact in the marketing segment for this quarter?

Question: Probal Sen - ICICI Securities - Analyst : INR7,800 crore. So that is the swing from Q3 to Q3.

Question: Probal Sen - ICICI Securities - Analyst : Okay. And third question was, sir, with respect to the expansion plans, which you mentioned about reaching 88 million in capacity on a CapEx of INR72,000 crore. Can you give a little bit of granularity, which plants are sought to be expanded and whether any petrochemical capacity will also be added alongside this refining capacity?

Question: Probal Sen - ICICI Securities - Analyst : Then we said this year that means FY25, the full year, right?

Question: Probal Sen - ICICI Securities - Analyst : And how much have we spent in nine months, sir? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 5:30AM, IOC.NS - Q3 2025 Indian Oil Corporation Ltd Earnings Call

Question: Yogesh Patil - Dolat Capital - Analyst : Sir, we wanted to move on the Russian crude side. Do we have any long-term oil sourcing contracts with the Russian supplier? And post these recent sanctions, what would be the impact on the contract? That's one thing. And sir, what is the current crude sourcing arrangement? How much is the long term, short term? If you could share percentage terms, that would be helpful. That's one.

Question: Yogesh Patil - Dolat Capital - Analyst : Sir, let me quickly reframe the question. So my question was like that do we have any long-term oil sourcing contracts with the Russian supplier for the calendar year 2025? And post these sanctions, will it impact on our any long-term contract, if any? Yeah, that's the question.

Question: Yogesh Patil - Dolat Capital - Analyst : Perfect. Sir, second question from my side. As you just mentioned that Panipat, Koyali and Barauni refinery expansions will mechanically be ready by FY25, '26. But sir, our question is mostly on the commissioning. When it will get fully commissioned and it will start contributing to our profit and loss account statement, mostly on the EBITDA contribution. When can we expect? Will it be in FY27 or it will take much more time and it will be reflecting in FY28? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 5:30AM, IOC.NS - Q3 2025 Indian Oil Corporation Ltd Earnings Call

Question: Yogesh Patil - Dolat Capital - Analyst : In case of Barauni, sir, commissioning expected in which quarter?

Question: Yogesh Patil - Dolat Capital - Analyst : So the full contribution will most likely come in FY28. Is that a correct understanding?

Question: Sumeet Rohra - Smartsun Capital Private Limited - Analyst : It's very nice of you to restart having these conference calls, and it's very encouraging to have a chat with you. Sir, today, my questions are more to you as an investor rather than an analyst because I mean, we have several analysts who are going to ask you on cracks and throughput, et cetera. So sir, I mean, I'm going to have a very candid conversation with you as an investor. Sir, today, IOC is the third most valuable company in terms of sales in India, okay? But our market cap has now slipped down to number 46. Now sir, clearly, from an investor point of view, this is absolutely unwarranted. And I also understand that our esteemed Oil Minister had a meeting with all the analysts and investors, and unfortunately, I couldn't make it there because you're obviously concerned on market cap. Sir, the first thing which I would like to highlight to you is today, sir, LPG under recovery of INR14,000 crore. I mean our profit is about INR5,500 crore. But sir, LPG under recovery is INR14,000 crore. Now sir, how -- I mean, how can we ever get market cap? If we don't get our earnings in order, I mean, today, if you adjust for the LPG, your earnings are, okay -- INR19,000 crore, INR20,000 crore is very good. You would also have paid a good dividend by now. But today, you've not even paid REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 5:30AM, IOC.NS - Q3 2025 Indian Oil Corporation Ltd Earnings Call dividend. So sir, this practice of this LPG under recovery of our -- absorbing this is not giving a very sweet spot because today, we have lost a staggering INR95,000 crore in market cap. I mean, I repeat, sir, from the high to today, we have lost INR95,000 crore of market cap. Now sir, this is investors' wealth, which is gone. And I mean, LPG prices were cut in March of last year. And the government is not paying till now, then sir, how is it going to benefit shareholders of public sector? I mean, just to give you a small example, public sector stocks have had the biggest bull run in India today. If you see over the last three, four years, I mean, stocks in defense, railways, I mean, they've gone up 10x, 15x, 20x. Sir, The oil and gas space is completely absent in this entire rally because of policy uncertainty or earnings visibility. Sir, my humble request to you is we are a very valuable company. I mean we are the number three company in sales in India. But sir, our market cap at INR1,70,000 crore surely does not deserve it from an investor angle. So sir, I would really request you that please have a look at some of these issues because you are doing extremely well in sales, you are doing extremely well in your throughputs, you're doing extremely well. But sir, ultimately, as the investor, sir, we are concerned with market cap because we come to make return for our investors. But in spite of backing India's best companies, if we don't make return because of LPG under recovery, then sir, it is not doing justice to anyone's cost. So sir, that's my honest feedback to you is that, sir, please have a very serious candid look and please communicate this to the relevant authorities that this LPG under recovery is clouting earnings, it's clouting dividend. The earnings visibility is not coming in because of which we are losing out. So my request is, sir, if you can get that issue addressed, it will go a long way in building our market cap. Just one thing, sir, today, our total asset is INR4,85,000 crore. I mean that is a staggering asset base we have, but market cap is one-third. So please, I humbly request you, sir, please have a look at this issue because this is something which will re-rate it. The budget is coming up now. It is a God given opportunity for you. Please have this issue addressed. That is my only request to you. Otherwise, sir, you are doing very well. I have nothing to tell you because you guys are a very superb management team in place. But sir, this LPG under recovery is something which is clouting us in a very, very bad way, sir. Thank you very much.

Question: Sumeet Rohra - Smartsun Capital Private Limited - Analyst : Unfortunately, I could not make it because it was only at a one-day notice that we got the inquiry. But however, sir, I have tried to communicate this because, sir, today, I'll be honest to you how our heart bleed. I mean when market caps of Indian Oil, Bharat Petroleum and Hindustan Petroleum at these prices is clearly not warranted. I mean, think about it, I mean, how can the three market caps of the three companies which supply 90% of India's fuel be at INR3,00,000 crore. I mean they're absolutely unwarranted and it is being suppressed just because of this issue of LPG under recovery. Think about it, sir, if today LPG under recovery was not there, would these companies be trading at these market caps. So sir, by not paying the LPG under recovery, the biggest damage the government is doing is to itself. So I really -- I'm astonished that why is this happening? Because sorry, I mean, it's in front of your eyes, right? I mean we've not paid dividend till today. I mean your throughput may go up by 25%. But if your bottom line does not show that, it's not going to really benefit from an investor point of view, right? Because see, you're holding investor calls for investors, right? But sir, ultimately, I mean, this is something which you can handle. And I'm sure that the government -- you guys go and explain to the government and say that we are minority investors and minority investors are suffering because of this, I'm sure they'll figure away and everything will come back because Indian Oil doesn't deserve this market. That's my only request to you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 5:30AM, IOC.NS - Q3 2025 Indian Oil Corporation Ltd Earnings Call

Question: Sumeet Rohra - Smartsun Capital Private Limited - Analyst : So I mean, I will request you once again, sir, please, I mean, if this is the only thing which is basically affecting us. Otherwise, you guys are doing a splendid job. You are doing something which is exemplary. You have achieved excellent sales. You guys are doing a wonderful role for the country, for the people. But sir, also to do something for your investors and shareholders, yes. Because ultimately, sir, I mean, today, you see all the OMCs are available at --

Question: Sumeet Rohra - Smartsun Capital Private Limited - Analyst : Yeah, no, sir, that point is absolutely taken, but your potential is to do much more. So if these issues are addressed, you can be a far, far more precious company in terms of market cap. That's my only point which I want to highlight to you, sir.

Question: Vivekanand Subbaraman - AMBIT Capital - Analyst : My two questions. One of them is on Terra Clean Limited. Your fiscal '24 annual report mentions an investment plan of around INR5,000 crore for establishment of 1 gigawatt renewable capacity. But sir, your target by fiscal '31 is 31 gigawatts. So could you give us some more details on the road map to get to 31 gigawatts by FY31 and the investment outlay needed? And thirdly, the business model on the renewable side? That is my first question. I'll ask the second one after you answer this.

Question: Vivekanand Subbaraman - AMBIT Capital - Analyst : Right. This is very helpful, sir. Is there any intermediate target, let's say, next two years, three years in terms of capacity? Or if not, that's also fine.

Question: Vivekanand Subbaraman - AMBIT Capital - Analyst : Okay. My second question is after these refinery expansions, you will be -- on an overall network, you will be at 88 MMTPA at a group level and your marketing throughput -- network throughput is around 92, 93 MMTPA. So will you be further undertaking refinery CapEx? Or is this the last stage of it?

Question: Vivekanand Subbaraman - AMBIT Capital - Analyst : Thank you very much for the detailed answer and once again, really appreciate you taking the time out to do this call. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 5:30AM, IOC.NS - Q3 2025 Indian Oil Corporation Ltd Earnings Call

Question: S. Ramesh - Nirmal Bang Equities - Analyst : It's a pleasure to listen to you and we would request you to continue this every quarter if you can. So the first thought is if you're looking at your investments in refining and petrochemicals, what is your long-term target in terms of ROCE? And when do you think you will get a visibility on the improvement in refining margins and petrochemicals since you're committing very large amount of CapEx. So if you can give your thoughts on that. And then I would also like to have some insight in terms of the progress you are expecting in the stand-alone CGD geographic areas and when you expect that CapEx to generate positive EBITDA?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Sir, I understand that. What I'm trying to look at is from the perspective of investors, it has to generate a certain ROCE, which you have been delivering in the last few years. So given the weak trends in margins, I would like to know what is your reading of when you get the kind of margins required to generate, say, 12% to 15% ROCE. That's what one is trying to understand.

Question: S. Ramesh - Nirmal Bang Equities - Analyst : Sir, your thoughts on your CGD investments when you start seeing positive EBITDA? And you can also give us some insight around any plans to monetize any of your subsidiaries in green energy or the pipelines, that would be great. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 5:30AM, IOC.NS - Q3 2025 Indian Oil Corporation Ltd Earnings Call

Question: S. Ramesh - Nirmal Bang Equities - Analyst : And any thoughts on monetizing your green energy subsidiary or pipelines or any other arm of your business?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : This is the last question. So in terms of the refinery modernization, can you give us a sense in terms of any residual -- any benefits from residual upgradation? And any thoughts you have on your lube business?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : And on any upside in gross refining margins from any bottoms upgradation you may be doing in your refinery expansion?

Question: S. Ramesh - Nirmal Bang Equities - Analyst : So what is the yield improvement you can expect based on the bottoms upgradation from the current yield? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 5:30AM, IOC.NS - Q3 2025 Indian Oil Corporation Ltd Earnings Call

Question: Amit Murarka - Axis Capital - Analyst : So I just wanted to check, firstly, what was the marketing inventory loss in three months and nine months, if you can provide?

Question: Amit Murarka - Axis Capital - Analyst : Sure. And nine months, if you could provide?

Question: Amit Murarka - Axis Capital - Analyst : Got it. And sorry, I joined the call a little late. Have you also provided the CapEx for '25 and '26?

Question: Amit Murarka - Axis Capital - Analyst : In '26, FY26?

Question: Amit Murarka - Axis Capital - Analyst : Sure. Also, I think on petchem side, I think some discussion has already happened. But just checking like given that there is so much of, I mean, drag in the spreads that you are seeing for quite some time and it seems more structural now, have you given any thought when you're kind of evaluating petchem expansions in your new refineries? What kind of assumptions you're doing like taking when you build in IRR for such projects? I just wanted to understand that as well.

Question: Amit Murarka - Axis Capital - Analyst : Got it. No, I agree with you on the demand side. I was only wondering that simply because like we are doing naphtha-based petchem, which frankly is a higher cost feedstock now compared to ethane. So is there any kind of longer term -- what kind of assumptions you are taking basically on the spreads simply because it's also a structural issue, while it is cyclical, but the ethane to naphtha is a structural issue. So I mean, I'm not so sure of the other recovery of margins going back to older levels. So I just wanted to understand, therefore that, what kind of assumptions you are taking when you're doing IRR for these projects?

Question: Vikash Jain - CLSA - Analyst : This is coming back to Russian crude. So the question was, after these sanctions, you did mention that nine months you have 25% of the crude intake is Russian crude. After this sanction in FY26, do you -- where do you see this number settling down? Could it be far lower? Could it be sub-10% kind of Russian crude based on whatever you can see at this point of time? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 5:30AM, IOC.NS - Q3 2025 Indian Oil Corporation Ltd Earnings Call

Question: Vikash Jain - CLSA - Analyst : So sir, when we say -- I think the discount right now is about $3 or so, right? So that is a landed discount adjusted for the fact that you are using a less efficient vessel and all of those things. That's the landed. That is when we say $3 or so discount, that's what is landed in India, right? Is that the broad -- that's -- we are comparing it to landed basis, right?

Question: Vikash Jain - CLSA - Analyst : Okay. And so if you were to adjust for the quality, anyway Russian crude required needs to be at a discount or used to be at a discount, say, before at about $1, $1.5, right? So I mean, if it comes down to sub-$2, then automatically it becomes less attractive. Isn't that the case?