InvestorQ : How did IOCL put out such fantastic results in the Sep-20 quarter?
Khushi Patel made post

How did IOCL put out such fantastic results in the Sep-20 quarter?

Dhwani Mehta answered.
3 years ago

You are right, fantastic is the right word. In fact, Indian Oil Q2 net profits were up almost 16-fold on a comparable basis at Rs.6165 crore. Interestingly, this happened in a quarter when the sales revenues fell by 13.4% at Rs.116,713 crore. This can be squarely blamed on the sharp fall in the oil prices, which fell below $40/bbl in the Brent crude market.

However, the costs were also substantially lower resulting in the operating profits for the quarter growing over 5-fold at Rs.7,535 crore. At the same time, the net profits for the Sep-20 quarter were 16 times the profits of the previous year at Rs.6,165 crore.

How did this profit boost come about? This boost to profits in the latest quarter largely came from better gross refining margins or GRMs which went up from about $1.28 per bbl to above $8/bbl on a yoy basis. In addition, the higher crude prices sequentially, resulted in better inventory holding valuations.

For the first half ended Sep-20 the cash flows generated from operating activities by IOCL was sharply higher at Rs.34,750 crore. That is nearly 40% higher on a YOY basis. This was predominantly assisted by more favorable working capital movements in the first half.

One more factored that favoured IOCL had nothing to do with the core operations of refining and market. IOCL also made a forex gain of Rs.791 crore in Sep-20 quarter compared to a forex loss of Rs.1159 crore in the Sep-19 quarter.