India's top oil conglomerate Indian Oil Corporation (IOC) on Friday reported an eleven-fold rise in its standalone net profit to Rs.6,227.31 crore for the September 2020 quarter, led by a boost up in refining margins and inventory gain on using low-priced crude oil for making fuels. The IOC net profit stands at Rs 6.78 per share. The oil major had reported a net profit of Rs 563.42 crore in the corresponding period a year ago, Indian Oil Corp (IOC) Chairman Shrikant Madhav Vaidya said in a release. In his word, it quotes: "The profit was up due to higher inventory and foreign exchange gains and better refinery margins,".
The company earned USD 8.62 on turning every barrel of crude oil into fuel in the second quarter of the current financial year 2020-21, compared with a gross refining margin of USD 1.28 in July-September 2019. IOC gained Rs 7,400 crore on using low-priced crude oil it procured during May and June to convert into petroleum products such as petrol and diesel in Q2. This inventory gain compared to an inventory loss of Rs 1,807 crore in Q2 of the 2019-20 fiscal.
Inventory gain is booked when a company buys raw material (crude oil in this case) at a particular price but by the time it is turned into fuel, the rates have gone up. Since retail pump prices are benchmarked at prevailing international rates, an inventory gain is booked. An inventory loss happens when the reverse happens. IOC also had a foreign exchange gain of Rs 672 crore in the July-September quarter as compared to a loss of Rs 1135-crore a year ago. Vaidya said the fuel demand, which had nearly halved following the covid-induced lockdown, is fast returning to normal. Petrol demand is already at a pre-COVID-19 level, while diesel is just 0.5 percent lower than normal. "We expect the two transportation fuels to come back to pre-COVID-19 levels within a month, he said.
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