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India Oil reports surprise 12% fall in profit amid jump in crude oil prices

Raw material costs rise 78% during second quarter

Indian Oil will later this month take a decision on buying Iranian crude in December.   © Reuters

MUMBAI (NewsRise) -- State-owned Indian Oil reported a more than 12% surprise fall in quarterly profit after margins for turning crude oil into fuels plunged at the nation's largest refiner.

Standalone net income for the quarter ended in September was 32.5 billion rupees ($443 million), compared with 36.96 billion rupees in the year earlier period, the company said on Friday. Revenue rose more than 37% to 1.52 trillion rupees. Analysts had expected a profit of 50.88 billion rupees for the quarter, according to Refinitiv data.

The profit was hurt by a 78% jump in raw material costs to 69.45 billion rupees. The company also incurred foreign exchange losses worth 26 billion rupees.

Indian Oil, which accounts for about a third of the nation's refining capacity, said its average gross refining margin -- or the profit it makes from each barrel of crude oil refined -- fell to $6.79 per barrel between July and September, compared with $7.98 per barrel a year earlier.

On Thursday, IOC's state-owned rival Hindustan Petroleum reported a more than 37% drop in quarterly profit, weighed by the higher input costs that squeezed refining margins.

India's state-run energy companies are grappling with higher crude oil prices that have squeezed the margins for refining. Retail prices of gasoline and diesel in India hit record highs, after global crude oil prices jumped to a four-year high last month.

The price increase forced the government to announce a cut in the retail prices of petrol and diesel by 2.50 rupees a liter. It also asked state-run refiners to absorb 40% of the cost in a bid to curb the impact of rising crude prices and a weaker Indian rupee.

The government move will lead to revenue losses of 22 billion rupees for the next six months for Indian Oil, Sanjiv Singh, chairman and managing director, told reporters in New Delhi.

Meanwhile, state-owned fuel retailers are forced to stop buying oil from Iran, one of the top suppliers to the south Asian nation, after the U.S. imposed sanctions.

The sanctions came following Iran's withdrawal from a nuclear deal drawn more than three years ago. The first batch of U.S. sanctions on Iran came into effect in August. Sanctions bearing direct impact on trade in the oil and gas sector with Iran will kick in on Nov. 4.

Indian Oil will later this month take a decision on buying Iranian crude in December, Singh said, amid hopes of New Delhi securing a waiver from the U.S. sanctions.

According to media reports, the U.S. could announce a waiver for India as early as Sunday.

Indian Oil is also in talks with oil suppliers such as Iraq and Saudi Arabia to take a part of their payment in rupee as the state-run refiner seeks to address the rising price of crude amid falling value of local currency.

Indian Oil shares gained 4.9% in Mumbai trading, while the benchmark BSE Sensex index ended 1.7% higher.

--Dhanya Ann Thoppil

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