Fortune 500 India: IOC aims for $1 trillion valuation by 2047

INDIA’S LARGEST state-owned oil marketing company, Indian Oil Corp. Ltd. (IOCL), has set its sights on becoming a $1 trillion company by 2047. That fits in with the Union government’s vision to transform India into a developed nation — Viksit Bharat — with a $30 trillion economy by then.

But all said, it’s an ambitious target for the $110 billion oil major. To achieve its target, IOCL has drawn up an aggressive capital expansion plan — to invest more than ₹31,000 crore in FY25 (it has already spent ₹8,500 crore in the first quarter itself). The company has also earmarked investments of more than ₹2 lakh crore over a longer timeframe to expand refining capacity, petrochemical integration, allied infrastructure and renewable energy assets.

“Our focus has been on projects that enhance energy accessibility, affordability, sustainability and security. We are committed to meeting the country’s growing demand for energy,” says Arvinder Singh Sahney, chairman, IOCL. As part of the plan, the oil marketer is looking to expand its refining capacity from 80.75 million metric tonnes per annum (MMTPA) to 107 MMTPA. This includes setting up Chennai Petroleum’s upcoming 9-MMTPA Cauvery Basin refinery at Nagapattinam, Tamil Nadu, and expanding its Panipat (15 MMTPA to 25 MMTPA), Gujarat (13.7 MMTPA to 18 MMTPA) and Barauni (6 MMTPA to 9 MMTPA) refineries.

Besides consolidating the core business, IOCL has also rolled out a green energy transition blueprint, with a commitment to achieve net-zero operational emission by 2046, in sync with India’s 2070 net-zero target. Hence, while sticking to the core oil and gas business, the company is also focusing on the future with a gradual shift towards electric vehicles (EVs). “We have over 10,000 EV charging stations and are working towards strengthening our network of battery swapping stations, while focusing on expanding the renewable assets and green hydrogen production,” says Sahney. IOCL currently has 37,472 fuel retail outlets across the country.

The oil major is also growing its petrochemicals portfolio, by setting up an integrated paraxylene and purified terephthalic acid project at its Paradip refinery, and a poly-butadiene rubber plant project at Panipat, during the current fiscal. The company is also conducting feasibility studies for other viable petrochemical projects, including setting up a grassroot petrochemical complex at Paradip, and the maleic anhydride & styrene projects at Panipat. The move aims at reducing India’s dependence on imports of materials.

Among others, while the oxo-alcohol project at the Gujarat refinery has already been completed, several others are expected to follow suit. These include expansion of the Guwahati refinery, the Salaya-Mathura crude oil pipeline system (phase-I), and the new lube complex near Chennai.

The OMC, which accounts for 31% of India’s petroleum refining capacity (Reliance Industries currently has 27%) reported a 326.16% year-on-year increase in net profit to an all-time high of ₹41,730 crore in FY24. This happened in a year when total income fell 8.52% from the previous fiscal.

While multiple factors contributed to the sharp increase in profits, much of it has been largely attributed to higher marketing margins compared with the previous fiscal. IOCL refineries and pipelines posted a record throughput of 73.3 million tonnes (MT) and 98.5 MT, respectively, and product sales of 97.5 million tonnes. The company also made significant inventory gains last fiscal, and lowered its forex losses, resulting in net positive impact.

Gross refining margins (GRM), however, fell to $12.05 per barrel in FY24, from $19.52 in the previous fiscal, mainly due to volatile crude prices. Oil prices hit a high of $90 per barrel early this year on geopolitical tensions and subsequently went down to $70 per barrel on demand concerns from major consumption centres. During the last three months, it remained rangebound around $74 per barrel. But despite falling GRMs, IOCL achieved the highest annual production of petrol at 12,555 thousand metric tonnes in FY24, an 8.5% increase YoY.

In FY23, GRM was higher due to high cracks in petroleum products. Since IOC refineries are configured for more diesel production, any variation in diesel cracks impacts overall margins.

All said, IOCL, which till quite recently was India’s largest corporation, has set out on a tough mission to be a $1 trillion enterprise. Whether it is achievable remains to be seen, but it’s surely among India Inc.’s most ambitious targets.