X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
IOC: Retail rush - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jun 14, 2004

    IOC: Retail rush

    Indian oil companies have been aggressively announcing plans to ramp up their retail presence in the face of competition from private players. In one such move, Indian Oil Corporation, the largest oil company in the country, has announced plans to set up nearly 1,000 retail outlets in the country in FY05. The company currently has nearly 9,000 retail outlets spread across the country.

      No of outlets Investment (Rs bn)
    IOC 1,000.0 13.5
    HPCL 900.0 12.0
    BPCL 700.0 5.0

    The company recently announced its FY04 results with a decent growth of 7% in topline and an impressive 15% in bottomline. However, during the year, IOC lost market share in overall sales and currently commands nearly 48% share as compared to 50% a year ago. At the same time, its subsidiary, IBP, has improved on its market share from 7% to 9% during the same period. The company now plans to merge IBP with itself and has got the final nod for the same.

    In order to boost its sales and capture lost ground, IOC now plans to enter the retail segment in a big way with investments lined up for LPG and retail segment. The company has also created a chest of Rs 2 bn to enter into exploration and production business so as to climb the value chain and reduce its dependence on external sources.

    However, the bid to revamp retail outlets seems under a cloud owing to the fact that IOC's throughput per outlet has been consistently reducing. It has actually come down from 49 KL (kilo litres) in FY03 to 44 KL of petrol in FY04. In case of diesel, the throughput has reduced from 150 KL to 133 KL on a monthly basis. In percentage terms, average throughput of petrol has declined 10.2% and diesel 11.3% per outlet across the industry, which is a big loss as diesel accounts for nearly 40% of petro-product sales in the country and has shown stagnant growth over the last few years.

    In this scenario, what is IOC banking on?
    Road development and village linkage plans have shifted the focus of the retail majors towards rural India. IOC, with its subsidiary, IBP (with a strong brand image in the rural market), may have an advantage. The merger of IBP into IOC shall prove to be more of a boon, as IOC shall have better control over operations and shall be able to utilise IBP's rural brand image to the company's advantage. Further, this would help reduce duplication of efforts and at the same time, the integration is likely to benefit by way of economies of scale.

    We believe, the move by all the PSUs to increase retail presence is more of a blocking tactic against new private entrants rather than to capture each other's market share. To put things into perspective, Reliance Industries plans to set up nearly 1,500 retail outlets in FY05. At the same time, we believe that although the companies are setting up their own outlets, existing and relatively less economical outlets shall close down and to that extent, the outlets shall compete against each other and location might prove to be the key going forward.

    At Rs 384, the stock is trading at a price to cash flow of 5.1x FY04 earnings (P/E multiple of 6.4x FY04 earnings). IOC has further declared a dividend of 210% for the full year (inclusive of interim and final dividend), thereby giving a yield of 5.5%. With its venture into upstream business and growing presence in the retail businesses abroad, IOC is diversifying its business portfolio. In the domestic scene, the government is likely to announce a price hike in the petrol and diesel prices, which provides further upside. However, subsidies on LPG and kerosene remain a major concern along with government control on operations.

     

     

    Equitymaster requests your view! Post a comment on "IOC: Retail rush". Click here!

      
     

    More Views on News

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

    GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    Mahanagar Gas Ltd (IPO)

    Jun 21, 2016

    Should one subscribe to Mahanagar Gas IPO?

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    IOC SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK IOC

    IOC 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE IOC WITH

    MARKET STATS