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    I O C L

    IOCMixed
    Oil, Gas & Consumable Fuels·28 Jan 2025
    Management Summary

    IOC's Q3 FY25 showed recovery from Q2's near-zero PAT with Rs. 2,874 crores profit, driven by improved normalized GRM of $6.60/bbl despite reported GRM remaining subdued at $2.95/bbl due to Rs. 5,200 crore inventory losses. The quarter saw highest-ever petroleum product sales. Key concerns centered on LPG under-recoveries of approximately Rs. 14,000 crores in 9 months, sharply narrowing Russian crude discounts post-new sanctions, and significant erosion in market capitalization. Management guided for government support on LPG compensation and expects refinery expansions to drive earnings from FY27.

    Highlights

    8

    • Q3 PAT of Rs. 2,874 crores vs Rs. 180 crores in Q2 and Rs. 8,063 crores in Q3 FY24; 9M PAT Rs. 5,697 crores vs Rs. 34,781 crores

    • Revenue from operations Rs. 216,649 crores vs Rs. 195,149 crores QoQ and Rs. 223,012 crores in Q3 FY24

    • Reported GRM of $2.95/bbl vs $1.59/bbl in Q2; normalized GRM $6.60/bbl vs $3.13/bbl in Q2; 9M normalized GRM $4.22/bbl vs $12.60/bbl

    • Highest-ever quarterly sales of petroleum products at 23.38 MMT; 9M sales 66.61 MMT vs 65.66 MMT YoY

    • Total inventory losses of Rs. 5,200 crores in Q3; 9M inventory losses Rs. 5,500 crores

    • Russian crude at 25% of imports in 9M FY25, discount narrowing from $3 to $2 post-sanctions

    • Borrowings at Rs. 1,31,480 crores (D/E 0.77), down Rs. 11,000 crores QoQ but up Rs. 15,000 crores YoY

    • Three refinery expansions adding 18 MMTPA with 80%+ physical progress; Panipat commissioning target Dec 2025

    Concerns

    2

    • Massive LPG under-recoveries with no compensation timeline

    • Inventory losses amplifying reported margin weakness

    What Changed1

    vs Q4 FY25

    Guidance items6 → 7 (+1)
    Key financials

    Metrics

    11

    Periods

    3

    Headline

    9
    • Revenue from Operations
      ₹2.17L Cr
      YoY-2.9%QoQ+11%
    • Profit After Tax
      ₹2,874 Cr
      YoY-64.4%QoQ+15.0%
    • Reported GRM
      2.95 $/bbl
      QoQ+85.5%
    • Normalized GRM
      6.6 $/bbl
      QoQ+110.9%
    • Refinery Throughput
      18.1 MMT
      YoY-2.2%QoQ+8.4%

    Q3

    1
    • Inventory Losses
      ₹5,200 Cr

    9M

    1
    • PAT
      ₹5,697 Cr
      YoY-83.6%

    Segment breakdown

    Refineries
    18.1 MMT Throughput102.3% Capacity Utilization82.2% Distillate Yield8.7% Fuel & Loss
    Pipelines
    24.9 MMT Throughput69.6% Capacity Utilization18,500 km Network Length
    Marketing
    23.38 MMT Petroleum Product Sales (record)66.61 MMT 9M Sales
    Petrochemicals
    0.89 MMT Q3 Sales2.407 MMT 9M Sales
    List

    Guidance & targets

    7
    CategoryTargetPriority
    CAPEX
    FY25 CAPEX
    Rs. 35,000 crores (Rs. 28,000 crores spent in 9M)
    		High
    CAPEX
    FY26 CAPEX
    Rs. 33,000 crores
    		High
    Capacity Expansion
    Panipat Refinery Commissioning
    December 2025, from 15 to 25 MMTPA, Rs. 38,000 crores
    		High
    Capacity Expansion
    Gujarat Refinery Expansion
    Q4 FY26, from 13.7 to 18 MMTPA, Rs. 19,000 crores
    		High
    Capacity Expansion
    Barauni Refinery Expansion
    End FY26/early FY27, from 6 to 9 MMTPA, Rs. 14,800 crores
    		Medium
    Renewables
    RE Capacity Target
    31 GW by 2030 (6-7 GW organic, rest via JV and M&A)
    		Medium
    CGD
    CGD EBITDA Positivity
    EBITDA positive from FY26
    		Medium

    Risks & concerns

    6
    RiskSeverity

    Massive LPG under-recoveries with no compensation timeline

    9M LPG under-recoveries of Rs. 14,000 crores dragging PAT to Rs. 5,697 crores vs Rs. 34,781 crores YoY; no dividend declared; market cap lost Rs. 95,000 crores from peak — Both acknowledged

    high

    Inventory losses amplifying reported margin weakness

    Q3 inventory losses of Rs. 5,200 crores; 9M losses of Rs. 5,500 crores; YoY swing of Rs. 7,800 crores from gain to loss in Q3 — Management acknowledged

    high

    Russian crude sanctions reducing discount advantage

    Discount narrowed from $3 to $2; Q4 supply disrupted by new sanctions on entities and vessels; no term contracts provide flexibility but also uncertainty — Both acknowledged

    medium

    Petrochemical margins structurally challenged by ethane-based competition

    PTA and glycol spreads sharply down; naphtha-based cracking disadvantaged vs ethane; management maintains cyclical view while committing Rs. 14,000+ crore to PX-PTA — Analyst downplayed

    medium

    Areas of Evasion(2)

    • Product-level inventory breakdown
    • Specific margin/ROCE targets

    Q&A highlights

    3

    “even the $3 has come down to $2 now... for the month of March, whatever I thought it is not going to come in the same quantity”

    Russian crude discounts narrowing from $3 to $2, with new sanctions impacting March supplies; no term contracts with Russia, so flexibility to shift to Middle Eastern sources exists

    asked by Vikash Jain

    2 min read5 chapters

    Detailed Narrative

    01

    Inventory Losses Mask Improving Underlying GRM

    Q3 reported GRM of $2.95/bbl was misleadingly low due to Rs. 5,200 crore inventory losses. Normalized GRM was a much healthier $6.60/bbl, more than doubling from Q2's $3.13/bbl. HSD cracks improved to $12.19/bbl QoQ from $9.77/bbl, though still far below Q3 FY24's $20.58/bbl. MS cracks remained low at $3.29/bbl. The Q3-to-Q3 YoY swing from inventory gains to losses was Rs. 7,800 crores.

    02

    Russian Crude: Sanctions Narrowing the Advantage

    Russian crude comprised 25% of 9M FY25 imports, with the discount narrowing from $3 to $2 per barrel. New US sanctions on Russian entities and vessels impacted March supplies. IOC has no term contracts with Russian suppliers, providing flexibility to switch to Middle Eastern and other sources. Management expects Russian crude will continue to flow but emphasized IOC will only buy at reasonable discounts. The company uses a sophisticated optimization package configuring 10 refineries and 30,000 km of pipelines.

    03

    LPG Under-Recovery: The Elephant in the Room

    LPG under-recoveries of approximately Rs. 14,000 crores in 9 months have devastated earnings, taking 9M PAT to Rs. 5,697 crores vs Rs. 34,781 crores YoY. No dividend was declared. An investor passionately highlighted that IOC's market cap of Rs. 1,70,000 crores was unjust for India's 3rd largest company by sales, with Rs. 95,000 crore market cap erosion from peak. Management assured that the government is 'seized of this matter' and referenced past Rs. 22,000 crore subsidy against Rs. 28,000 crore under-recoveries, but provided no specific timeline.

    04

    Refinery Expansions: 18 MMTPA Addition on Track

    Three major expansions totaling Rs. 72,000 crores are progressing well: Panipat (15→25 MMTPA, Rs. 38,000 crores, Dec 2025 target), Gujarat (13.7→18 MMTPA, Rs. 19,000 crores, Q4 FY26), and Barauni (6→9 MMTPA, Rs. 14,800 crores, end FY26). All have crossed 80% physical progress. First-year utilization typically 50-60%, with full utilization taking 2 years. Meaningful earnings contribution expected from FY27 with full impact in FY28.

    05

    Strategic Diversification into Renewables and CGD

    Terra Clean subsidiary targeting 31 GW RE by 2030 through organic (6-7 GW), JVs with NTPC Green and others, and M&A (5-6 GW). 1 GW tender already out, 4 GW work in progress. CGD business has 26 GAs with Rs. 20,000 crore total CAPEX planned through 2034, expected to turn EBITDA positive from FY26. Ethanol blending at 18.2%, targeting 20% this year. Green hydrogen plant (10 KTA) at Panipat and 15 fuel cell buses in trials.

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