Indian Oil Posts Nation’s Biggest Quarterly Loss of $4.1 Billion

Indian Oil Corp. posted the nation’s biggest quarterly loss of 224.5 billion rupees ($4.1 billion) after the government failed to compensate it for capping fuel prices and processing margins turned negative.

The country’s largest company had reported an earnings deficit of 37.2 billion rupees a year earlier, the New Delhi-based state-owned refiner said in a stock exchange filing today. The median estimate of 21 analysts compiled by Bloomberg was a loss of 64.3 billion rupees. Hindustan Petroleum Corp. posted a record loss of 92.5 billion rupees.

Prime Minister Manmohan Singh’s government, struggling to contain a budget deficit and inflation, failed to compensate state-run refiners for selling some fuels below cost to curb price gains. The rupee’s slump increased the cost of purchases for the refiner, which imports almost 80 percent of its oil requirements, while Brent crude’s 20 percent decline in the quarter lowered the value of its stockpiles.

“The $4 billion loss is stunning and staggering,” said Jagannadham Thunuguntla, chief strategist at SMC Global Securities Ltd. in New Delhi. “The oil marketing policy is so complicated that these companies have to live at the mercy of cash compensation policy of the government.”

Indian Oil fell 1.8 percent to 251.60 rupees at the close in Mumbai, the lowest level since June 19. The stock has declined 0.9 percent this year, compared with a 14 percent increase in the benchmark Sensitive Index.

Increasing Debt

Indian Oil didn’t get compensated for a loss of 174.9 billion rupees on fuel sales below-cost, Chairman R.S. Butola told reporters in New Delhi. The company received 82 billion rupees as a government grant a year earlier.

The delay in getting compensation increased the refiner’s interest payments, Butola said.

Indian Oil had debt of 909 billion rupees as of June 30, compared with 754.5 billion rupees on March 31, Butola said.

The refiner lost $4.81 on every barrel of crude processed into fuels in the quarter, compared with earnings of $4.71 a barrel a year earlier, according to the statement. The drop in the refining margin was on account of an inventory valuation loss of 40.6 billion rupees, or $7.54 a barrel, according to the earnings release.

The company got a discount of 80.4 billion rupees on crude bought from state-run explorers, including Oil & Natural Gas Corp., compared with 79.3 billion rupees a year earlier.

The rupee declined 8.6 percent against the U.S. dollar in the quarter, the worst performer among major currencies in Asia Pacific.

Brent crude oil in London had its biggest quarterly drop in 3 1/2 years in the three months ended June 30, declining 20 percent to $97.80 from March 30.

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