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Presentation for Investors FY 2004

Presentation for Investors FY 2004. PRESENTATION OUTLINE. OIL INDUSTRY OVERVIEW COMPANY OVERVIEW FINANCIAL PERFORMANCE CAPITAL EXPENDITURE PLANS GLOBALIZATION / DIVERSIFICATION SHAREHOLDERS’ RETURN SUBSIDIARIES OVERVIEW. OIL INDUSTRY OVERVIEW. Current scenario.

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Presentation for Investors FY 2004

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  1. Presentation for Investors FY 2004

  2. PRESENTATION OUTLINE • OIL INDUSTRY OVERVIEW • COMPANY OVERVIEW • FINANCIAL PERFORMANCE • CAPITAL EXPENDITURE PLANS • GLOBALIZATION / DIVERSIFICATION • SHAREHOLDERS’ RETURN • SUBSIDIARIES OVERVIEW

  3. OIL INDUSTRY OVERVIEW Current scenario

  4. PETROLEUM PRODUCTS - HISTORICAL DEMAND GROWTH • Consumption grew at a CAGR of 2.7% p.a. over the last 5 years & Production registered a CAGR of 9.2% 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, FY04 company estimates

  5. DOMESTIC CRUDE AVAILABILITY* • The gap being met through imports *Including condensate Refining capacities as on 1 April

  6. 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) GAIL India Ltd. (Gas Transport & Distribution) * Pure Refining Subsidiary of ONGC

  7. INDUSTRY OVERVIEW- 31.3.2004 Refining Capacity 127.4 MMT Market Size 107.5 MMT Product Pipelines 62.3 MMT Crude Pipelines 28.5 MMT IOC is the only downstream company that owns crude pipelines Share includes subsidiary companies

  8. SECTOR OVERVIEW • Sector moved from APM to Market Determined Pricing Mechanism (MDPM) • Entry of private and multinational companies in the oil sector imminent • Prices of MS/HSD generally reviewed fortnightly • Subsidies on SKO/LPG reduced- to be phased out gradually over the next 2 years

  9. COMPANY OVERVIEW India’s largest downstream company

  10. INDIA’S NO. 1 DOWNSTREAM COMPANY (Rs/Crore) Rank Turnover 130203 1 Net Profit 7005 1 Net Worth 23047 1 Total Assets* 53852 1 Market Cap 57944 1 Exchequer Contribution 35960 1 • Indian Oil is India’s largest downstream oil company • 19th largest oil company in the world- Fortune Global 500 * Excludingdepreciation

  11. INDIANOIL OVERVIEW • (MMT) • FY’03FY’04 Growth • Refining Thru’put 35.29 37.66 6.7% • Product Sales Volume* 47.56 48.61 2.21% • Pipeline Thru’put 41.11 45.17 9.88% • Fortune “Global Rank” improved to 189 in the current year from 191 in the previous year. • Consistently “AAA” rated by ICRA since the beginning • International ratings by both Standard & Poor’s and Moody’s * Including exports

  12. REFINERIES – OVERVIEW Key Facts • Owns 7 refineries with 41.3 MMT cap. – 32.5%REFINING SHARE • 67% 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 on 1 April’04

  13. KEY REFINERIES IN HIGH DEMAND REGIONS About 67% of IOC’s refining capacity is located in close proximity to the high demand northern and western regions Northern Region Eastern Region MMT Bhatinda MMT Panipat Mathura Kandla Western Region Southern Region Koyali Salaya MMT MMT Source: Company estimates FY04, and X Plan sub group report

  14. HIGHLIGHTS - REFINERIES • Average Refinery Capacity utilisationdeclined marginally • Distillate yield highest ever • During the year refining capacity increased to 41.35 MMT as on 31.3.04 • Strategic inland refineries locations with most effective supply and evacuation system through pipelines • All refineries meet product specification requirement in line with environmental regulations

  15. 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 1046 MS Quality Improvement 2233 IOC shall be able to meet the environmental regulations well in time *Bangalore, Hyderabad, Pune, Ahmedabad, Surat, Kanpur, Agra ** Estimated cost

  16. PERFORMANCE - REFINERIES • Refining margins in tandem with international margins • Refineries accounts for about 50% of IOC’s earnings during FY 04 • Margin enhancement opportunities thru’ stream sharing & improving crude/supply logistics

  17. PIPELINES – OVERVIEW Key Facts • 7,586 kms. of crude / product pipelines with a capacity of 56.85 MMT • Owns approx. 62% 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 Paradeep Product Proposed Product Crude Oil Proposed Crude Vijayawada Chennai Other Companies’ Pipelines Product Proposed Product Crude Oil Karur Madurai Kochi As at 1 April, 2004

  18. HIGHLIGHTS - PIPELINES • Capacity utilisationdeclined marginally • Capacity utilization lower due to commissioning of new pipelines. • Total capacity of pipelines increased from 52.75 MMTPA to 56.85 MMTPA during FY 04.

  19. SIGNIFICANT UPSIDE Significant increase in pipelines earnings on recovery of tariff based on rail freight Average Rate as per Railway Freight (Rs/MT) 70% 100% Product Pipelines Average APM Rate(1) (Rs/MT) KAPL-Sabarmati 63.92 154.7 220.1 GSPL-Siliguri 168.66 454.3 649 BKPL-Kanpur 175.81 676.06 965.8 HBPL-Barauni 101.25 537.46 767.8 MJPL-Jalandhar (Ex-Mathura) 118.77 537.46 767.8 KBPL (Kandla - Bhatinda) 1026.28 1295.14 1850.2 KNPL-Navagam 51.19 140.14 200.2 KVSPL-Sidhpur 61.3 274.19 391.7 MTPL-Tundla 140 140.14 200.2 Crude Pipelines SMPL- Mathura 189.74 931.42 1330.6 HBCPL- Barauni 481.8 475.42 679.6 (1) Source: Company estimates

  20. MARKETING OVERVIEWCONTROL RETAIL OUTLET SITES IOC is focused on strengthening its position and control in the retail segment % of Retail Outlet sitesOwned/taken over long lease IOC Retail Outlets No. of Outlets • 2765 retail outlets of IBP – 41.37% Company owned

  21. SEGMENT MARKET SHARE* • IOC has a market share of about 44% in retail segment and about 63% in direct sales. *Among PSUs

  22. PERFORMANCE - MARKETING • Marketing accounts for about 27% of IOC’s earnings during Apr-Mar’04 • Margins have improved significantly post deregulation • Margins affected due to under recovery of subsidy on LPG/Kerosene

  23. RESEARCH & DEVELOPMENT CENTRE • IOC’s world class R&D centre has won recognition for its pioneering work in the following: • Lubricants formulations • Refinery processes • Pipeline transportation • Bio-fuels • R&D has developed over 21,000 formulations of SERVO brand lubricants and greases • The centre has over 90 national and international patents to its credit

  24. FINANCIAL PERFORMANCE Sterling Performance

  25. STRONG FINANCIAL PERFORMANCE • The revenues of the company have registered a CAGR of 8.5% over the past 5 years (a) After commissions and discounts, exclusive of Company’s own use of oil

  26. STRONG AND CONSISTENT NET INCOME GROWTH • The net income has grown at a CAGR of 30.6% over the last 5 years RONW 18.6% 18.1% 18.4% 35.7% 33.4% EPS (Rs.)* 20.92 23.29 24.70 52.35 59.97 * Bonus issue 2:1 during FY04

  27. IOC FINANCIALS (Rs./Crore) FY 2003 FY 2004 SOURCES OF FUNDS Networth 18928 23047 Loan Funds 14495 12179 Deferred Tax Liability 38734284 37296 39510 APPLICATION OF FUNDS Net Fixed Assets 25370 27453 Investments 5363 5596 Working Capital 65636461 3729639510 • Borrowings reduced by 16% during FY04 • Reserves increased by 22%

  28. IOC FINANCIALS (Rs/Crore) FY 2003 FY 2004 Gross Sales 120130 130392 EBITDA 10864 12013 Interest 788 453 Depreciation 1662 1869 Tax 2299 2686 PAT 6115 7005 • PAT increased by over 14.5% • Interest cost reduced by 43%

  29. RETURN ON INVESTMENT (Rs/Crore) FY’03FY’04 • Sales Revenues 120130 130392 • EBITDA 10527 11847 • Capital Employed 25321 28259 • Return on Capital 41.6% 41.9% Employed (ROCE) • Return on Capital Employed is significantly higher than IOC’s WACC, which is in the 10% range

  30. PROFITABILITY RATIOS FY’03 FY’04 • Operating margin 7.7% 7.8% • Net profit margin 5.1% 5.4% • EPS (Rs)* 52.35 59.97 • Cash EPS (Rs)* 66.58 75.97 • IOC stock is trading at around 5 times cash earnings, reflecting an earnings yield of 20% per year *EPS & Cash EPS for previous period adjusted for bonus issue of 1:2 in Aug’03

  31. LIQUIDITY RATIOS FY’03FY’04 • Total Debt:Equity 0.77:1 0.53:1 • Long-term debt:equity 0.39:1 0.31:1 • Interest cover(Times) 13.8 27.2 • Phenomenal decrease in debt:equity ratio • Interest Cover doubled

  32. EBITDA CONTRIBUTION-SEGMENT WISE

  33. CAPITAL EXPENDITURE PLANS Consolidating Growth & Position

  34. TOTAL Xth PLAN OUTLAY (2002-03 to 2006-07) Total : 24,399 crore (548) (217) (6149) (10852) (3043) (764) (2826) Total Capital Expenditure FY 2005- 6256 crore

  35. CAPEX PLAN MAJOR PROJECTS Estimated Cost Completion (Rs/Crore) Schedule Ongoing Projects MS Quality Improvement Projects 2233 Jan-Sep’ 05 New DHDT at Mathura (0.05%’S’ specs) 1046 Dec’ 04 Panipat Refinery Expansion 3883 Apr’ 05 9 MMTPA Paradip Refinery Project 7500 2008-09 Crude supply to Panipat through KBPL 777 Dec’ 04 Production of LAB at Gujarat 1185 Aug’ 04 Paraxylene & PTA at Panipat 4704 Aug’ 05 Paradeep-Haldia Crude Pipeline 1178 Mar’06 Naphtha Cracker Complex 6344 2007-08

  36. CAPEX PLAN MAJOR PROJECTSLAB at Gujarat Estimated Cost 1185 crore Completion year August’04 Capacity Input Kerosene Stream ( TMTPA) 92 Benzene (TMTPA) 40 Output Linear Alkyl Benzene (TMTPA) 120

  37. CAPEX PLAN MAJOR PROJECTSParaxylene & PTA at Panipat Estimated Cost 4704 crore Completion year August’05 Capacity Input Naphtha (TMTPA) 500 Output Paraxylene (TMTPA) 360 PTA (TMTPA) 550

  38. CAPEX PLAN MAJOR PROJECTSNaphtha Cracker Complex Estimated Cost 6344 crore Completion year* 2007-08 Capacity Naphtha Cracker (TMTPA) 2170 LLDPE/HDPE Swing Unit (TMTPA) 350 HDPE Unit (TMTPA) 300 Polypropylene Unit (TMTPA) 600 MEG Unit (TMTPA) 250 *42 months after DFR approval and commissioning within 3 months

  39. CAPEX PLAN MAJOR PROJECTSParadip - Haldia Crude Oil Pipeline Estimated Cost Rs.1178 crore Completion year March’06 Main Line Capacity (MMTPA) 11 Tentative Length (Km) • Offshore/Onshore 23 -Main Line 330 353 Tentative Dia (Inches) • Offshore/Onshore 48 -Main Line 30

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

  41. GLOBALISATION/DIVERSIFICATION E & P Domestic • NELP-I, II & III: IOC, in consortium with ONGC/OIL as Operator, has obtained 11 blocks with equity stake in the range of 15%-30%. • CBM-I: IOC-ONGC consortium has 2 CBM blocks with IOC’s equity stake at 20% in each. • IOC has farmed-in with 27% participating interest in an Exploration Block in Assam-Arunachal Pradesh, with Premier Oil (38% & Operator), HOEC (25%) & OIL (10%). • IOC Board has also approved farm-in with 35% participating interest in an Exploration Block in Cachar, Assam, with Premier Oil (49% & Operator) & Essar Oil (16%). Farm-in agreement signed.

  42. GLOBALISATION/DIVERSIFICATION E & P Overseas • Consortium of ONGC Videsh, Oil India & IOC awarded the Farsi Exploration block in Iran. IOC has a 40% stake in the block. • IOC – ONGC-VL Alliance, in consortium with BP and Occidental, has been participating in the bidding process for Kuwait Project for development of Northern Kuwait Oilfields. GAS • Dahej Terminal of Petronet LNG commissioned • Expected positive contribution from Gas business – Rs.670 crore in FY 2005

  43. GLOBALISATION/DIVERSIFICATION PETROCHEMICALS • PX-PTA plant with PX- 360 TMT and PTA- 550 TMT capacity planned at Panipat for value addition of naphtha • LAB facility- 120 TMT at Gujarat refinery • Naphtha Cracker Complex - 2.17 MMTPA OVERSEAS DOWNSTREAM MARKETING • Entered into retail business in Sri Lanka thru’ Lanka IOC (WOS) – Trincomalee Tankfarm of 1 million KL taken over and supplies to LIOC commenced • WOS established in Mauritius for building infrastructure and enter into downstream business

  44. SHAREHOLDERS’ RETURN Wealth Maximisation

  45. SHAREHOLDING PATTERN 31.3.2004 * Including employees

  46. 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 38 years • Dividend payment for FY 04 - 2453 Crore * Post bonus of 1:2

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

  48. SUBSIDIARIES OVERVIEW Positive Contribution

  49. SUBSIDIARIES OVERVIEW 12.85 9.17 • Refining capacity utilization for FY04 • CPCL BRPL • 93.9% 90.5% * 3MMTPA capacity added on 31 Mar’04

  50. GROUP OVERVIEW 55.6% 51.0 • Combined synergies of IOC & IBP shall enable the company to tackle competition Note: Domestic sales & Market share among PSUs

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