Saturday, August 11, 2012

22,451 (Crores)


Largest ever quarterly loss in Indian corporate history? Check.
Calling for your product to be regulated again because its only nudge-nudge-wink-wink ‘deregulated’ now? Check.
The people supposed to pay you money not having any because they paid you out last time? Check.
Running out of cash to pay your suppliers? Check.

IOCL’s quarterly numbers are a disaster, to put it lightly. Its easy to read a number and go whoa, without really understanding anything about it. Let’s put it in context, shall we?

You read about the latest, greatest mobile phone going around? A little birdie called the Samsung Galaxy S3? It retails for around 38,000. This loss could buy 59 lakh of those and dump them in the Arabian Sea. Or wait, IOCL’s a oil company right? With this much money, you could buy around 300,000 Honda City and dump them too. I’m sure neither Honda nor Samsung would mind.

Actually, the most interesting part of this for me is the news that soon IOCL will run out of limits to buy stuff. Then what happens? Its not like we’re self-sufficient or anything. Does crude oil inflow just stop? IOCL supplies around 40% of India’s total crude requirement, so if something’s not done soon, we’re stuffed.

Plus a 4000-crore asset writedown and 3100 crore forex loss? Surely, surely these two could’ve been minimized? Maybe not the inventory writedown (Brent prices fell 20% during the quarter), but the forex loss?

And yes, nothing is going to improve till prices, especially of diesel, are raised. Prices can’t be raised because that loses you votes stokes inflation. And so on.

Another side-effect is that with these kinda losses, they can’t even go in for capex, which would have helped them to increase the complexity levels of their refineries (higher the complexity, the lower the quality of crude oil it can turn to final products, low quality raw material costs less, hence lesser costs and more profits) and this leads to GRMs in the range of 4 dollars or so, which is not quite great, in the spirit of putting things mildly.

Quick question, just how the hell do equity analysts suggest a price for these oil marketing cos.? Isn’t just about everything determined by the government? Dunno…

In a couple of days there will be a lot of equity research reports coming your way, if you’re into those and I’ll be damned if this isn’t the gist of all of them. Everyone needs to make a living.