INDIAN OIL CORPORATION

INDUSTRY OVERVIEW

Indian Oil& Gas Sector– US$ 110 billion industry 6th largest consumer of petroleum products and expected to be at 4th

position by 2010 (source: IBEF) Indian crude demand– 130 MMTPA

30% Domestic

70% Imported 19 Refineries– Capacity of 177 MMTPA Refining capacity expansion planned over 5 yrs. Is over 60% Approx. 7 lakh people employed in the oil & gas industry 1.58 lakh kiloleters of fuel dispensed from retail outlets every day

amounting

COMPANY B ACKGROUND

COMPANY BACKGROUND

Indian Oil Corporation at a Glance

Ticker IOC

Number of Shares 209934345

Promoters Holding 80.50%

Market Capitalization (Rs.In crores) Rs.48135.10

Employees 31945

Refinery Capacity (in MMTPA) 60.20

Retail Outlet (including IBP) over 32,500

Shareholders Pattern

1%

6%

9%

3%

81%

Promoter I nstitution Bdy Corporate

I ndividuals Others

Refining Market Share

15%9% 7%

22%

7%40%

IOCL BPCL HPCL ONGC RIL ESSAR

Market Share Of Major Players

3%

49%21%

9%18%

I OCL BPCL HPCL RI L OTHERS

Market Share in Pipeline

47% 7%

16%30%

I OCL ONGC HPCL BPCL

COMPANY BACKGROUND

COMPANY BACKGROUND

IOCL is a public sector undertaking formed in 1964 through the merger of Indian Oil Company Ltd. and Indian Refineries Ltd.

18th largest petroleum company in the world. Major supplier to Defense forces, Railways,

STUs (army-96%; navy-100%; Airforce-90%; STUs-87%; Railways-84%).

Only oil company to operate in every part of India.

B USINESS ANALYSIS

ONLY COMPANY TO HAVE PRESENCE IN HIGH

CONSUMPTION NORTH AREA

UBIQUITOUS PRESENCE

Marketing:Market shareOf 45%; 55% of industry

infrastructure

Petrochemicals:Operational Lab &

Px/PTA Plants

E&P: Forays In India& Overseas

Gas: Sourcing &marketing

Refining: 10 Refineries; Refining market share of 40%

Pipeline: 9273 kms pipeline(crude & product)

PRODUCT PROFILE

CRUDE

FURNACE

VACCUM

UNIT

Butane & Lighter

Naphta

Gasoline

Kerosene

Light Gas Oil

Heavy Gas Oil

Residue Fuel Oil

SGU/LMU

NHT/CCR

KMU/DHDS

DHDS

FCCU

VSU

90-220F

220-315F

315-450F

450-650F

650-800F

800+F

DISTILLATIONTOWER

(Crude Unit)

LPG– 3.70%

MS- 17.40%

ATF/SKO-4.50%

HSD-40.70%

BITUMEN-1%

FO-32.70%

BUSINESS MODEL

VALUEPROPOSITION: offer

petroleum products like petrol, high speed diesel,

naphta & lubricant.

COSTSTRUCTURE :raw

material is the major component of the cost it almost incurred 81%

of total cost followed by interest and staff cost.

CUSTOMERRELATIONSHIP;

company maintain long term & cordial relationship with his

clients

CUSTOMERSEGMENTS:

fuels to most of the sector

i.e. automobile aviation etc.

ACTIVITYCONFIGURATION; high

tech infrastructure with on line automatic

quality control ensures quality check

CORECAPABILITIES:

strong and well established marketing & distribution

network, favorable

coverage ratios provides support

to its credit profile.

PARTNERNETWORK

Major partners railway,

automobile sector

infrastructure

REVENUESTREAMS; company revenue comes from

wide variety of petroleum products

and special petroleum products.

CUSTOMER

OFFER

FINANCE

DISTRIBUTIONCHANNELS; company

has strong nationwide distribution network

with 88329 retail outlets.

STRATEGIES TO FACE DOWNTURN

Entering into new business segment of city gas distribution Able to earn revenue through other business activity Planning to invest aggressively in petrochemical sector Initiating research in new frontiers (such as residue gasification coal-

to-liquid, gas-to-liquid, alternative fuels, synthetic lubes, nano-technology, etc.)

Planning to enter in retail business through opening retail outlets at prime location petrol pumps

Investing in oil bonds to decrease debt level 180 new & cost effective product formulations developed Indalin+ technology for conversion of Naphtha to LPG/MS Creating Unique Selling Points in all customer segments Expanding the non-fuel business to improve cos. bottom line Marketing of alternate fuels and maintaining product

differentation

PERFORMANCE ANALYSIS

REFINING: ANNUAL OPERATING HIGHLIGHTS

Gross Refining Margins $/ bbl

5.36.2

4.64.2

9.02

3.37

0

1

2

3

4

5

6

7

8

9

10

FY04

FY05

FY06

FY07

FY08

Apr-

Dec0

8

$Capacity Utilization

104100

8590

95100

105

FY08 FY09

%

Refinery Throughput

47.4

62.3

010203040506070

FY08 FY09

MM

T

OPERATIONAL PERFORMANCE

Sales & Sales Growth

0

200

400

600

800

J AS07

OND07

J FM08

AMJ08

J AS08

OND08

Rs b

n

-100102030405060

%

Sales Sales Growth

Trend of PBDIT & OPM

-100

-50

0

50

100

150

200

J AS07

OND07

J FM08

AMJ08

J AS08

OND08

Rs b

n

-10

-5

0

5

10

15

20

25

30

35

%

PBDI T OPM

•Fall in sales due to decrease in domestic demand as well as

export during Oct 08 to Mar 09

•Due to increased crude prices and increasing under recovery,

company has to reduce production

•Lowest GRM in previous 5 yrs leads to decrease in OPM

•High cost of fund keeps pressure on operating profit

•Non-revision of selling price also leads to fall in operating profit

FINANCIAL PERFORMANCECost Structure as % of Sales

0

10

20

30

40

50

60

RM TradedGoods

Staff Depn I nterest Other Tax

%

2007-08 2008-09

PAT & NPM

-80

-60

-40

-20

0

20

40

60

J AS07 OND07 J FM08 AMJ 08 J AS08 OND08

Rs.

(in

bn

)

-10

-8

-6

-4

-2

0

2

4

6

%

PAT(LHS) NPM (RHS)

D/ E Ratio

0.7

0.75

0.8

0.85

0.9

0.95

2005-06 2006-07 2007-08`

Cost as a % of sales has increased due to high material cost because of high crude prices and increase

in other expenses

PAT has declined from the previous year due to heavy increase in under recovery during 1st half of FY09 and

so it keeps pressure on NPM

Trend of Dividend Payout

020406080

100120140

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

%

Continuous dividend payment policy taken by the company

PROFITABILITY RATIOS

FY05 FY06 FY07 FY08 FY09

OPM

NPM

ROAvg.NW

ROAvg.CE

5.32

0.1314.8315.7114.4918.47

-13.9419.5420.5916.1819.62

4.46 4.97 4.56 -3.40

2.78 3.43 2.78 0.023.48

CAPITAL MARKET PERFORMANCE

Under performed during half of FY09 because of high crude prices

Sensex falls 40%, O&G falls by 33% whereas IOCL has fallen by 13%. Beta of stock is 0.60.

Relative Strength Index

0

20

40

60

80

100

120

1 A

pri

l2

00

8 

25

Ap

ril

20

08

 

21

Ma

y2

00

8 

12

Ju

ne

20

08

 

4 J

uly

20

08

 

28

Ju

ly2

00

8 

20

Au

gu

st2

00

8 

12

Se

pte

mb

er

20

08

 7

Oct

ob

er

20

08

 

31

Oct

ob

er

20

08

 2

5N

ov

em

be

r2

00

8 

19

De

cem

be

r2

00

8 

14

Ja

nu

ary

20

09

 

6 F

eb

rua

ry2

00

9 

3 M

arc

h2

00

9 

27

Ma

rch

20

09

 

Sensex O&G I OCL

WAY AHEAD

Governmental action in formulating a viable market related pricing policy

Rationalization of duties and taxes– move towards ‘GST’ regime

Planned set up off retail outlets to justify long term viability-planned township.

Evaluate options for retail outlets as receiving and storage points instead of only sales points—Warehousing facilities, Receipt points for NFRs etc.

Generate additional revenue and margin streams from Alternate Fuels– CNG, Auto-LPG and Bio-Fuel

Company’s revenue will grow after operation started at Panipat refinery

Company is diversifying its business through entering into city gas distribution segment

ISSUES AND CONCERNS

Volatility in crude oil prices.

Government controlled prices.

Rupee Fluctuation.

Lack of necessary infrastructure.

Depleting fuel resources.

Rising bad debts.

Delay in projects.

Cost of oil rigging is high.

CHALLENGES FOR COMPANY

Company is considering entering into other energy sub-sectors to compliment its own line of business.

Optimization of refining processes.

Logistics & supply chain management.

Timely execution and safe commissioning of project.

Consolidation of retail and direct consumer businesses through better offerings than competitors.

Retention of skilled manpower.

Enhancing profitability.

REFINERY BUSINESS: Set TO Deliver Strong Value

Strategic Location, ProximityTo Materials, Access to End

Markets

Refining Industry OutlookRemains Strong

India Emerging as a GlobalRefining Hub

Leverage Existing ProjectExecution Capabilities and

Infrastructure

Market Leader in DownstreamEconomies of scale Benefits

High Complexity, CostCompetitiveness,

Product Flexibility and HighGRM Potential