MUMBAI (NewsRise) -- State-owned Indian Oil posted a 91% slump in third-quarter net income after refining margins plunged.
Standalone net income for the quarter ended in December was 7.17 billion rupees ($101 million), compared with 78.8 billion rupees in the year-earlier period, the company said Wednesday. Revenue surged about 22% to 1.61 trillion rupees. Analysts had expected the company to report a loss of 6.80 billion rupees for the quarter, according to Bloomberg data.
The profit was hurt by a 33% jump in expenses to 1.59 trillion 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 $5.12 a barrel between October and December, compared with $7.42 per barrel a year earlier.
India's state-run energy companies have been grappling with higher crude oil prices that 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 in October.
The price increase forced the government to announce a cut in the retail prices of petrol and diesel. 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 company had in October warned that the government move will lead to a revenue loss of 22 billion rupees for six months. In January, state-owned fuel retailers such as HPCL and IOC said they have stopped absorbing a government-mandated cut.
With the fall in oil prices last quarter, refiners who had bought fuel in advance at higher prices have been forced to sell at a cheaper rate, incurring heavy inventory losses. The inventory loss in the quarter stood at 66.55 billion rupees, compared with a gain of 52.20 billion rupees a year earlier.
Indian Oil does not see any inventory loss in the current quarter with the crude price expected to settle in the range of $60-$65 a barrel, said A.K. Sharma, its finance director.
Further, the government has yet to provide the reimbursements for cooking gas subsidy worth 58.35 billion rupees in October-December, Chairman Sanjiv Singh told reporters at a news conference in New Delhi. The Indian government owes almost 120 billion rupees in cooking gas subsidies this fiscal year, he said, adding the company's market borrowings increased due to the non-payment of this due.
The subsidies, which allow households to buy cooking gas cylinders at less than half the market price, are a hugely popular scheme in the south Asian country.
Indian Oil shares lost 2.1% in Mumbai trading, while the benchmark BSE Sensex index ended little changed.
--Shivangi Acharya and Dhanya Ann Thoppil