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Presentation to Investors

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  1. Presentation to Investors December 2003

  2. PRESENTATION OUTLINE • OIL INDUSTRY OVERVIEW • LANDMARKS 2002-03 • FINANCIAL PERFORMANCE • OPERATING HIGHLIGHTS • RETURN TO SHAREHOLDERS • SUBSIDIARIES OVERVIEW • HALF YEAR HIGHLIGHTS • PATH FORWARD

  3. OIL INDUSTRY OVERVIEW 1st year of deregulation

  4. PETROLEUM PRODUCTS - HISTORICAL DEMAND GROWTH • Consumption grew at a CAGR of 3.4% p.a. over the last 5 years & Production registered a CAGR of 12.5% p.a. • Demand expected to grow at a CAGR of 3.7% p.a. during X Plan period (2002-03 to 2006-07) Source: PPAC, FY03 company estimates Projections-MOP&NG Sub-group report for X Plan submitted to Planning Commission

  5. OIL INDUSTRY STRUCTURE Oil & Natural Gas Corporation Ltd. UPSTREAM (Exploration & Production) Oil India Ltd. Indian Oil Corporation Ltd. DOWNSTREAM IBP Ltd. (Pure Marketing) (Refining & Marketing) Chennai Petroleum Corporation Ltd. (Pure Refining) Bongaigaon Refinery & Petrochemicals Ltd. Hindustan Petroleum Corporation Ltd. Mangalore Refinery & Petrochemicals Ltd.* Bharat Petroleum Corporation Ltd. Kochi Refinery Ltd. (Pure Refining) Numaligarh Refinery Ltd. Reliance Industries Ltd. (Pvt. Sector Refining) Gas Authority of India Ltd. (Gas Transport & Distribution) * Subsidiary of ONGC

  6. INDUSTRY OVERVIEW- 31.3.2003 Refining Capacity 114.7 MMT Market Size 103.7 MMT Product Pipelines 49.79 MMT Crude Pipelines 28.5 MMT IOC is the only downstream company that owns crude pipelines Share includes subsidiary companies

  7. DEREGULATION OVERVIEW • Refineries deregulated w.e.f. 1 April’98 • All products except five- Gasoline, Gasoil, ATF, LPG and Kerosene decontrolled • ATF decontrolled w.e.f. April 2001 • Marketing & Pipelines sector deregulated w.e..f. 1 April’02 • Market determined pricing of all products- Prices of MS/HSD reviewed fortnightly • Oil Pool dismantled

  8. DEREGULATION OVERVIEW • Petroleum Regulatory Board to be set up • Subsidies on LPG & Kerosene borne thru’ fiscal budget and to be phased out in the next 3-5 years • Freight subsidy for far flung areas continues • Marketing rights for transportation fuel awarded to new entities • Marketing service obligation for rural & far flung area for all players • Free pricing of indigenous crude • Guideline for laying new pipelines announced Deregulation has brought forth balance between reasonable earnings for the industry and protection of consumer interest

  9. LANDMARKS 2002-03 Benchmarks for future performance

  10. INDIA’S NO. 1 DOWNSTREAM COMPANY (Rs./crore) Rank Turnover 119848 1 Net Profit 6115 1 Net Worth 18928 1 Assets 49881 1 Market Cap 42640 1 Exchequer Contribution 33007 1 • Indian Oil is India’s largest downstream oil company

  11. INDIA’S NO. 1 DOWNSTREAM COMPANY (MMT) Rank Sales Volume 47.56 1 Refining Capacity 38.15 1 Pipeline Capacity 52.75 1 Marketing infrastructure 1 • Only Indian Company in the Fortune Global 500 list for FY02 • Consistently “AAA” rated by ICRA since the beginning • International rating by both S&P and Moodys

  12. FY 2002 FY 2003 Growth • Refining Thru’put (MMT) 33.76 35.29 4.5% • Product Sales Volume* (MMT) 48.07 47.56 (1.5)% • Pipeline Thru’put (TMT)40.36 41.11 1.9% • Fortune “Global Rank” • All Companies- Revenues 226 191 CORPORATE OVERVIEW • Highest refining and pipeline thru’put in FY03 * Includes export sales of 0.90 MMT in FY02 and 1.10 MMT in FY03

  13. LANDMARK EVENTS • Top-notch financial performance- highest ever turnover & profitability • Bonus issue of 1:2 in July’03 to reward shareholders • Record dividend of 290% (193% post-bonus) • Highest refining and pipeline thru’put • Added 647 km of pipeline length • Highest Market Cap since listing • SAP roll out in all refineries and several marketing locations

  14. FINANCIAL PERFORMANCE Sterling Performance

  15. STRONG FINANCIAL PERFORMANCE • Revenues in FY03 up by 4% • The revenues of the company have registered a CAGR of 14.6% over the past 5 years (a) After commissions and discounts, exclusive of Company’s own use of oil

  16. STRONG AND CONSISTENT NET INCOME GROWTH • Net profit for FY03 increased by 112% • The net income has grown at a CAGR of 29.6% RONW 19.4% 18.6% 18.1% 18.4% 35.7% EPS(Rs.) 56.85 31.38* 34.94 37.05 78.53** * 1:1 Bonus Issue ** EPS post bonus Rs.52.35

  17. IOC FINANCIALS (Rs./Crore) FY 2002 FY 2003 SOURCES OF FUNDS Networth 15311 18928 Loan Funds 19070 14495 Deferred Tax Liability 3405 3873 APPLICATION OF FUNDS Net Fixed Assets 24141 25370 Investments 9722 5363 Working Capital 3923 6563 • Borrowings reduced by 24% during FY03 • Reserves increased by 25%- Bonus issue of 1:2

  18. IOC FINANCIALS (Rs./crore) FY 2002 FY 2003 Gross Sales 114864 119848 EBITDA 7523 10832 Interest 1544 762 Depreciation 1379 1656 Tax 1715 2299 Net Profit 2885 6115 • Highest growth in profitability in any single year

  19. RETURN ON INVESTMENT (Rs./crore) FY 2002 FY 2003 • Sales Revenues 114864 119848 • EBIT 6144 9176 • Capital Employed 37786 37296 • Return on Capital 16.3% 24.6% Employed (ROCE) • Return on Capital Employed is significantly higher than IOC’s WACC, which is in the 11% range

  20. PROFITABILITY RATIOS FY 2002 FY 2003 • Operating margin 5.5% 7.3% • Net profit margin 2.5% 4.9% • EPS (Rs.) 37.05 78.53* • Cash EPS (Rs.) 54.93 99.87* • IOC stock is trading at around 4 times cash earnings, reflecting an earnings yield of 30% per year. * Post bonus Rs.52.35 & Rs.66.58 respectively

  21. LIQUIDITY RATIOS FY 2002 FY 2003 • Total Debt:Equity 1.25:1 0.77:1 • Long-term debt:equity 0.48:1 0.39:1 • Interest cover 4.9 14.2 • IOC’s debt has an average maturity of over 5 years, and the average cost of debt is below 6%

  22. CONSOLIDATED GROUP FINANCIALS (Rs./crore) FY 2002 FY 2003 Gross Sales 113400 119920 EBITDA 7618 12110 Interest 1712 903 Depreciation 1488 1865 Tax 1646 2680 Net Profit 2772 6662 • Positive contribution of subsidiary companies to group financials

  23. TOTAL Xth PLAN OUTLAY (2002-03 to 2006-07) Total : Rs. 24,399 crore (7398) (6956) (510) (1624) (3651) (2368) (1892) Total Capital Expenditure FY 2004- Rs. 4523 crore

  24. CAPEX PLAN MAJOR PROJECTS Ongoing Projects(Rs./crore) Production of LAB at Gujarat 1248 Aug’ 04 9 LPG Bottling Plants 218 X Plan New Projects MS Quality Improvement Projects 2702 Sep’ 04 New DHDT at Mathura (0.05%’S’ specs) 926 Dec’ 04 Paraxylene & PXPTA at Panipat 5104 Apr’ 05 Panipat Refinery Expansion 4165 Jan’ 05 Crude supply to Panipat through KBPL 734 Jan’ 05 Projects under Review Paradip Refinery Project 12400 Residue Upgradation Facility at Gujarat 4392

  25. OPERATING HIGHLIGHTS Refineries- The Inland Advantage

  26. REFINERIES – OVERVIEW Key Facts • Controls 10 refineries with 47.5 MMTPA cap. – 42%REFINING SHARE • 58% capacity catering to northern/western region - HIGH DEMAND & GROWTH AREAS • All refineries linked by crude pipelines - LOW TRANSPORTATION COST • All refineries linked by product pipelines- MOST COST EFFECTIVE EVACUATION SYSTEM • Potential for brownfield expansions in least time Bhatinda Digboi Panipat Bongaigaon Mathura Numaligarh Barauni Guwahati Bina Koyali Haldia Jamnagar Mumbai Paradeep IOC’s Refineries Existing Under Construction/Proposed Subsidiary Companies Vizag Other Companies’ Refineries Existing Under Construction/Proposed Chennai Mangalore Cuddalore Narimanam Cochin As at April 1,2003

  27. KEY REFINERIES IN HIGH DEMAND REGIONS About 58% of IOC’s refining capacity is located in close proximity to the high demand northern and western regions Northern Region Eastern Region Bhatinda MMT MMT Panipat Mathura Kandla Western Region Southern Region Koyali Salaya MMT MMT Source: Company estimates FY03, and X Plan sub group report

  28. HIGHLIGHTS • Strategic inland refineries locations with most effective supply and evacuation system through pipelines • All refineries meet product specification requirement in line with environmental regulations • Average Refinery Capacity utilisationbetter • Distillate yield improved 92.5 88.5 72.8 72.1

  29. PROACTIVELY ADDRESSING ENVIRONMENTAL ISSUES IOC has proactive plans to meet the prospective Euro/ Bharat norms Road Map to Vehicular Emission Norms Euro II Euro III Euro IV Metros Introduced April 2005 April 2010 Mega Cities* April 2003 April 2005 April 2010 Entire Country April 2005 April 2010 IOC Investment Plans Rs./crore HSD Quality Improvement 1996 MS Quality Improvement 1418 TOTAL INVESTMENT FOR EUROIII COMPLIANCE 3414 IOC shall be able to meet the environmental regulations well in time * Bangalore, Hyderabad, Pune, Ahmedabad, Surat, Kanpur, Agra

  30. FINANCIAL PERFORMANCE • Refining margins in tandem with international margins • Better refining margins during FY 03 • Margin enhancement opportunities thru’ stream sharing & improving crude /supply logistics

  31. OPERATING HIGHLIGHTS Pipelines- Life lines of IOC

  32. PIPELINES – OVERVIEW Key Facts • 7,170 kms. of crude / product pipelines with a capacity of 52.75 MMTPA • Owns approx. 67% of total throughput capacity (downstream) • Low cost crude transportation to all refineries • Low cost evacuation system linked to all refineries • Two SBM near Vadinar Jalandhar Bhatinda Saharanpur Meerut Nahorkatiya Panipat Delhi Tinsukia Bongaigaon Mathura Siliguri Jodhpur Lucknow Tundla Digboi Chaksu Barauni Guwahati Kanpur Kot Sidhpur Ahmedabad Kandla Vadinar Koyali BudgeBudge Salaya Navgam Haldia Manmad IOC’s Pipelines Vizag Mumbai Product Proposed Product Crude Oil Proposed Crude Vijayawada Chennai Other Companies’ Pipelines Product Proposed Product Crude Oil Karur Madurai Kochi

  33. HIGHLIGHTS • Capacity utilisationdeclined during FY03 93.4 88.7 • Increase in pipeline earnings on recovery of tariff linked to railway freight • EBITDA contribution of pipelines increased sharply and constitutes around 25% of total EBITDA contribution during 2002-03

  34. SIGNIFICANT UPSIDE Significant increase in pipelines earnings on recovery of tariff based on rail freight Average Rate as per Railway Freight(2) (Rs/MT) 70% 100% Product Pipelines Average APM Rate(1) (Rs/MT) KAPL-Sabarmati 52.80 182.81 261.15 GSPL-Siliguri 133.04 310.18 443.11 BKPL-Kanpur 152.50 379.32 541.42 HBPL-Barauni 84.08 274.09 391.55 MJPL-Jalandhar (Ex-Mathura) 85.23 289.00 412.85 KBPL (Kandla - Bhatinda) 709.23 946.41 1352.01 Crude Pipelines SMPL 187.87 781.41 1116.30 HBCPL 472.72 518.98 741.40 (1) Source: As per rate set by the PPAC applicable for 2001-02. (2) Source: Company estimates

  35. OPERATING HIGHLIGHTS Marketing- Our biggest asset & strength

  36. OVERVIEW IOC IBP Others TOTAL IOC %* • LPG bottling capacity (TMT) 3321 0 3040 6361 52 • Lube Blending Capacity (TMT) 583 50 390 1023 62 • Depots/Terminals (Nos.) 176 15 220 411 46 • LPG Bottling Plants(Nos.) 79 0 80 159 50 • Aviation fuel stations (Nos.) 93 0 29 122 76 • Retail Outlets 8034 2079 9717 19830 51 IOC has a dominant share in marketing infrastructure with over 50% share in all segments As of 1 April 2003, * IOC % includes IBP

  37. SEGMENT MARKET SHARE* • IOC (including IBP) has a market share of over 51% in retail segment and over 63% in direct sales. FY 2002-03 * Among PSUs

  38. FINANCIAL PERFORMANCE • Marketing accounts for about 30% of IOC’s earnings during FY’03 • Margins have improved significantly post deregulation • Margins affected due to under recovery of subsidy on LPG/ Kerosene

  39. SIGNIFICANT INITIATIVES Globalisation/Diversification - The path to growth

  40. GLOBALISATION • Exploring markets in neighboring countries • Entered into retail business in Sri Lanka thru’ Lanka IOC (P) Ltd. (WOS)- plans to garner 20% market share • Trincomallee Tankfarm- 1 million KL taken over and supplies to LIOC commenced • WOS established in Mauritius for building infrastructure and enter into downstream business • Lubes marketed in Malaysia, Dubai, Bangladesh, Sri Lanka etc.

  41. DIVERSIFICATION E & P • Consortium of ONGC Videsh, Oil India & IOC awarded the Farsi Exploration block in Iran • NELP I, II & III: IOC alongwith consortium members has been awarded 12 blocks and 2 blocks of Coal Bed Methane GAS • Dahej Terminal of Petronet LNG scheduled for commissioning by December 2003 • Indo-Bangladesh Gas Pipeline • Decision of Govt. of Bangladesh awaited

  42. DIVERSIFICATION PETROCHEMICALS • PX-PTA plant with PX- 362 TMT and PTA- 553 TMT capacity planned at Panipat for value addition of naphtha • LAB facility- 120 TMT at Gujarat refinery

  43. SHAREHOLDERS’ RETURN Wealth Maximisation

  44. SHAREHOLDING PATTERN 30.9.2003 * Including employees

  45. RETURN TO SHAREHOLDERS • Periodic sharing of reserves to reward shareholders Bonus 1981-82 1994-95 1999-00 2003-04 1:2 2:1 1:1 1:2 • Consistent dividend payment for the last 37 years • Dividend payment for FY 03- Rs.2258 crore * 193% post bonus of 1:2

  46. RETURN TO SHAREHOLDERS Market Capitalisation • Highest market cap since listing • Third position in market capitalisation

  47. SUBSIDIARIES OVERVIEW Positive Contribution

  48. 9.35 8.3 SUBSIDIARIES OVERVIEW • Refining capacity utilisation for FY03 • CPCL BRPL • 96.83% 63.83%

  49. 50.16 55.7% SUBSIDIARIES OVERVIEW (Domestic) • Combined synergies of IOC & IBP shall enable the company to tackle competition Note: Market share among PSUs

  50. FINANCIAL PERFORMANCE SUBSIDIARIES (Rs./crore) Turnover PAT FY 2002 FY 2003 FY 2002 FY2003 CPCL 6175 8636 64 303 BRPL 1195 1862 (199) 178 IBP 8453 8753 196 88 Lanka IOC - 65 - 4