NEW DELHI: State-run oil refining and marketing giant Indian Oil Corporation Ltd (IOCL) Wednesday disclosed a consolidated net loss of Rs 8,565.54 crore for the last quarter of financial year 2019-20 (Q4FY20). It had reported a consolidated profit of Rs 6,003.96 crore in the corresponding quarter of the
previous year.
According to financial details filed with the stock exchanges, the primary contributor for the loss was a large Rs 11,304.64 crore inventory loss arising from the sharp fall in price of crude oil. Other large losses included those arising from associates and joint ventures, which stood at Rs 6,547.34 crore, and a Rs 4,145.53 crore foreign exchange loss due to sharp currency fluctuations.
Oil companies take inventory losses when crude oil prices fall before this stock of crude is processed and sold on the market. Since retail prices are benchmarked to high-frequency raw material prices, oil firms take inventory losses when crude dives. Rising oil similarly result in inventory gains.
Indian Oil’s financial statements note that while the inventory loss during Q4FY20 had come up to Rs 6,855.35 crore, the unprecedented lockdown and demand destruction since March 25 had led it to consider a longer timeframe to calculate the net realisable value (NRV) of its crude oil stock. “... as a one-time measure, a longer time period is considered for better estimation of NRV... As a result of considering a longer time period, the write down in valuation of inventories increased to Rs 11,304.64 crore,” it said in a note.
This loss has been treated as an exceptional loss on the balance sheet due to its “nature and size”, it added.
Meanwhile, total consolidated income from operations for the quarter fell by 3.11 per cent to Rs 1.43 lakh crore from Rs 1.48 lakh crore in the fourth quarter of the previous year, while total expenses increased by 7.65 per cent to Rs 1.5 lakh crore from Rs 1.39 lakh crore the previous year.
For the whole financial year 2019-20, the company recorded a net consolidated loss of Rs 1,876.32 crore against a net profit of Rs 17,273.85 crore the previous year. The sharp currency fluctuations resulting from the chaos caused by the Covid-19 pandemic also saw the oil refiner take a much larger forex loss during the financial year.