Indian Oil: A quarter of profit, but bleeding continues

MUMBAI: Indian Oil reported a net profit for the September 2012 quarter as it accounted for over Rs 16000 crore of grants from government. However the profits remain short of its losses in the first quarter, which means the company remained loss making in the half year Apr - Sept 2012.

The company received Rs 16185 crore of upstream support during the half year, while the government support was lower at Rs 16094 crore. In spite of this it lost Rs 13635 crore by selling fuels below cost.

As a result of these losses, the company's net worth - total shareholders'funds -has reduced 22% in last six months to Rs 45,041 crore. Ongoing cash losses has also forced the company to borrow heavily which has pushed its borrowings up 26% within last six months to Rs 88960 crore at end September 2012.

The scrip jumped momentarily on the quarterly profits before the falling back to the earlier levels. Till the time the company continues to remain under the revenue uncertainties and subsidy regime its valuations are unlikely to improve.