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Indian Oil quarterly profit beats expectations on refining margins

Shares rise most in three weeks after earnings

Indian Oil's net income for the three months through June came to a better-than-expected 36 billion rupees.   © Reuters

MUMBAI (NewsRise) -- State-owned Indian Oil, India's largest oil refiner and fuel retailer, posted a better-than-expected first-quarter net profit after refining margins exceeded expectations. Its shares jumped the most in three weeks.

Stand-alone net income for the quarter ended in June declined more than 47% to 36 billion rupees ($523 million), the company said Wednesday. Revenue rose less than 1% to 1.51 trillion rupees. Analysts had expected the company to report a profit of 23.70 billion rupees, according to Bloomberg data.

The latest quarter included 6.27 billion rupees of a provision that has been written back after the company settled old tax disputes in the western Indian state of Maharashtra.

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 -- stood at $4.69 a barrel between April and June, compared with $10.21 per barrel a year earlier. Nomura expected the core refining margins to be about $3 per barrel.

India's energy companies had grappled with rising crude oil prices that squeezed their margins for refining. The Singapore gross refining margins were down 43% on year at $3.50, among the weakest in recent years, Nomura said in a report earlier this month.

Ahead of India's federal elections in May, the state-owned refiners did not raise fuel prices, a move that led to a further contraction in their margins. Also, the federal budget in June increased the excise duty on petrol and diesel by 1 rupee each, limiting the room for companies to expand margins.

To be sure, crude prices have softened from last year's highs. That has forced refiners who had bought fuel in advance at higher prices to sell at a cheaper rate, squeezing their gains from inventory. The inventory gain in the quarter stood at 23.6 billion rupees, compared with 70.6 billion rupees a year ago.

Earlier this year, Indian Oil had emerged as the highest bidder for city gas licenses to supply compressed natural gas to automobiles and piped natural gas to households across 35 Indian cities. On Monday, Indian Oil said it will invest 96 billion rupees along with billionaire Gautam Adani's Adani Gas to roll out the infrastructure for retailing CNG to automobiles and piped natural gas to households in 10 cities.

The companies had formed an equal joint venture in 2013 to roll out city gas distribution.

Indian Oil shares gained 4.3% in Mumbai trading on Wednesday, while the benchmark BSE Sensex index ended 0.2% higher.

--Dhanya Ann Thoppil

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