INDIAN OIL COMPANY

Indian Oil Company

Task A

Indian Oil Company

Indian Oil Corporation (IOC) is one of India's largest oil companies. Indian Oil Corporation (IOC) is the largest oil company in India terms of sales. It is the flagship Indian national oil company in the downstream sector (India Oil Corporation, 2011). The company is engaged in the business of exploration, development and production of crude oil and natural gas, transportation of crude oil and production of LPG. It is the second largest oil and gas Company in India in terms of total proved plus probable oil and natural gas reserves and production. The company's leading market position gives it a competitive edge with a strong brand image (India Oil Corporation, 2011). However, increasing competition could create hindrances for the company in securing sites for its new gas stations, which in turn could hurt the company's expansion plans. IOC owns and operates 10 of India's 20 refineries, with a combined refining capacity of 65.7 million tons per annum (1.3 million barrels per day). The company accounts for 48% of petroleum products market share, 34.8% national refining capacity, and 71% downstream sector pipeline capacity in India (India's Spectacular Story in Petroleum Refining, 2010, 99-105). IOC's aviation service commands over 63% market share in aviation fuel business. IOC exports a part of its products to Bangladesh, Nepal, Sri Lanka, and Pakistan. The company's leading market position gives it a competitive edge with a strong brand image. IOC has strong downstream asset infrastructure, in terms of the number of refineries, the size of its retail network, as well as the size of its pipeline network (India petroleum industry, 2010, 74-85).

The company operates most of the refineries in India. These include two refineries of subsidiary Chennai Petroleum Corporation (CPCL). The company also operates cross-country crude oil and product pipeline network spanning 10,899 kms reaching 56.8 million households (India Oil Corporation, 2011).

Five years outlook

The company recorded revenues of $54,471 million in the fiscal year ending March 2010, a decrease of 12.6% compared to fiscal 2009. Its net income was $2,332 million in fiscal 2010, compared to a net income of $566 million in the preceding year (India Oil Corporation, 2011).

The table and chart above have been taken from the financial statements of the Indian oil company. Both table and chart shows that company's profitability (profit margin) tremendously declined in 2009 from 2008. This huge change was contributed to the recession at that time. In time of recession the demand for the oil product were reduced drastically. Therefore, the price of oil product went down all over the word. In August 2008, crude oil price touched its highest point in the history $125.10 per barrel. However, soon the price of crude oil touched its lowest point $37.51 in February 2009. This huge change in crude oil price shrunk the profit margin of the company leading to low net profit in 2009.

From the above chart, we can also see that revenues of the company increased in the same year, ...