The Hindu Business Line : IndianOil raising $300-m foreign currency loan

The company is hopeful that the total borrowings may be brought down to last year’s level (Rs 25,000 crore) during the later part of the fourth quarter through sale of oil bonds likely to be issued by the Union Government.

Pratim Ranjan Bose

Kolkata, Nov. 28 IndianOil may raise an approximately $300-million syndicated foreign currency loan in December-January to part-finance its increasing working capital requirement arising out of the recent increase in crude oil prices.

Overall, the company may raise short-term loans of up to Rs 3,000 crore to meet working capital requirements, taking the total borrowings close to Rs 30,000 crore from Rs 26,500 crore in October.

According to sources, the company is hopeful that the total borrowings may be brought down to last year’s level (Rs 25,000 crore) during the later part of the fourth quarter through sale of oil bonds likely to be issued by the Union Government against the marketing loss in the third quarter.

Making a loss

As the Government declines to increase the retail fuel prices in spite of a record rise in crude prices, IndianOil is currently incurring a revenue loss of Rs 138 crore a day.

The near month contract on crude oil is now ruling at $97 a barrel at Nymex. IndianOil has already reduced its crude oil inventory from 13-14 days to 10-11 days to restrict working capital outflow.

The only saving grace for the company seems to be that the refining margin (the difference between crude and product price) continues to be much higher during the third quarter this year compared to the corresponding period of the previous years.

According to sources, IndianOil has already clocked a refining margin of over $9 a barrel for October and November. The situation is likely to continue till at least the first fortnight of December.

Compensations

Accordingly, if the Centre continues to compensate the oil marketing companies (through oil bonds and discounts) for revenue losses on the marketing front, IndianOil is expected to maintain its profitability in the third quarter.

It may be mentioned that during the last few financial years, crude oil prices have remained firm during the third quarter owing to the onset of winter and the corresponding demand for heating oil. The situation generally eases in the middle of the fourth quarter.

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