Hit by a double whammy of rising crude prices and depreciating rupee, PK Goyal, director-finance, IOC, says the oil marketing company will face an under recovery of Rs 12800 cr for per unit rise in crude pirce and per unit fall in rupee level.
Steep rupee depreciation and a massive surge in international crude prices on a likely US threat of attacking Syria comes as a double whammy for Indian oil marketing companies (OMCs).
PK Goyal, director-finance, IOC told CNBC-TV18 that per unit rise in crude and per unit fall in rupee will lead to losses of Rs 12,800 crore.
"A Re 1 depreciation of the currency will increase its under recovery roughly by Rs 8,000 crore and a USD 1 per barrel hike in crude prices will lead to an under recovery of Rs 4,800 crore," he elaborated.
Below is the edited transcript of Goyal’s interview to CNBC-TV18.
Q: Your view on how much do you think the under recovery situation could get worse because of the way crude has risen and the rupee has fallen?
A: A Re 1 depreciation in the rupee increases the under recovery by roughly Rs 8,000 crore and if crude increase by USD 1 per bbl, that also increases the under recovery by 4,800 crore. So, it’s a double blow to the oil marketing companies, both for crude increase and the rupee depreciation.
Q: If you can tell us the calculation as of the last time you calculated maybe end of day prices yesterday, what exactly is the total under recovery bill or what is likely to be your shortfall in per litre of diesel?
A: A Re 1 depreciation increases the diesel under recovery by 78 paise. So, under recovery as on August 16 was Rs 10.22 paise. That may go further when we do this fortnightly calculation.
Q: It has gone up from August 16, crude at that time was south of USD 108 per bbl maybe even USD 106 per bbl. We have seen USD 10 jump in crude in that time
A: We have to take a fortnightly average rate for this. The crude has increased only for the last two days. So, we have to calculate and it is difficult to give the figure but it will be definitely above Rs 11.
Q: Have you had any interactions with either the finance ministry or the government on when the next one time diesel price hike could come in because the oil ministry has been for it and we are hearing that perhaps there could be a diesel price hike of about Rs 5-7 a litre. Have you had any interactions with them on when this could come through?
A: It is very difficult to comment on that because Government of India has to take a decision about the diesel price increase. So, I have no comment on that because that has to be in the hand of ministry only.
IOC stock price
On July 28, 2014, Indian Oil Corporation closed at Rs 322.75, down Rs 2.35, or 0.72 percent. The 52-week high of the share was Rs 385.35 and the 52-week low was Rs 186.20.
The company's trailing 12-month (TTM) EPS was at Rs 28.91 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 11.16. The latest book value of the company is Rs 280.66 per share. At current value, the price-to-book value of the company is 1.15.
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