Indian Oil Corporation (IOC), India’s largest refiner and fuel retailer, is planning to raise ₹15,000 crore in long-term debt by March 2025 to fund its capital expenditure of ₹35,000 crore for the fiscal year.
Anuj Jain, Director of Finance stated that around 30% of this amount, approximately $500 million to $1 billion, is expected to come from foreign currency loans and bonds, depending on interest rate trends.
He added, “High borrowing this year is mainly due to lower profits and the need to fund the capex of about ₹35,000 crore this fiscal year. Borrowings may be lower if there is improvement in cash flows and internal accruals.”
The borrowing tenure will be three to five years, focusing on creating a balanced debt portfolio. The move comes as declining interest rates in the U.S. make overseas borrowing more attractive, though risks like a depreciating rupee and higher hedging costs persist.
Indian Oil’s debt is expected to rise to ₹1,47,000 crore by March 2025 from the current ₹1,32,000 crore, having already increased from ₹1,16,500 crore at the start of the fiscal year. The increase is attributed to lower profits and funding requirements for capital projects.
The company reported a sharp 99% drop in net profit to ₹180 crore in the July-September quarter of 2024, primarily due to inventory losses of ₹4,200 crore and weak refining margins.
Additionally, Indian Oil’s losses from selling LPG below market rates reached ₹8,870 crore by September-end, with compensation from the government yet to be received. Future borrowing needs will depend on cash flow improvements and the timing of government compensation. Despite financial challenges, IOC remains committed to its long-term capital investments.
On December 18, 2024, IOC share price opened at ₹139.15, touching the day’s low at ₹138.46, as of 9:51 AM on the NSE.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
Published on: Dec 18, 2024, 10:02 AM IST
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