The Hindu Business Line : IOC shareholders okay lube manufacturing arm merger

Indian Oil Corporation has informed the Bombay Stock Exchange that it has received shareholders' nod for merging Indian Oil Blending Ltd (IOBL) with itself. IOBL, which employs 432 people, was incorporated in 1963 and is a wholly owned subsidiary of IOC.

IOBL, the lube manufacturing arm of the retail major, has lost its relevance because IOC itself has entered lubricants manufacturing in a big way. Further, IOC's own facilities are more modern and efficient than IOBL's facilities in Vashi, Trombay and Kolkata.

In 2004-05, IOBL lost a substantial Rs 4.88 crore on a reduced turnover of Rs 27.23 crore. The company had made a profit of Rs 57 lakh on a turnover of Rs 29 crore in 2003-04.

According to an IOBL report, profitability had been dented because of low capacity utilisation (211 tonnes out of 238 tonnes) caused by IOC blower indent and also because of the low blending fees offered by the parent company.

IOC sources say that the blending company has failed to keep pace with the rise in competition in the lubricants sector and has been operating at much higher cost levels compared to the industry average.

"We were offering reduced indent to IOBL because we were getting a much higher return from other companies," an IOC official said.

"After the amalgamation, IOC will carry out cost-cutting measures in IOBL's facilities. Also, the amalgamation will provide us with the opportunity to synchronise the supply of base oil from refineries to the blending plant. IOBL has substantial land assets which could be put to productive use," the official said, adding that all IOBL employees would be absorbed into IOC.

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