Disinvestment in IndianOil (IOC), scheduled for the fourth quarter, is a golden opportunity for the government to act on its promise to deregulate the retail pricing of diesel. If the government squanders the chance, deregulation would become more difficult post-issue.
Freeing diesel pricing would help the government get optimum valuation for its shares in IOC. “Deregulation of diesel will be a huge positive, which would result in the re-rating of the sector, benefitting IOC in the form of stable cash flows, more liquidity and interest from domestic and foreign institutional investors, and a positive sentiment in the market. We believe, with deregulation, IOC has a further upside of 12-15% with a potential price target of Rs 450,” Madhumita Ghosh, vice-president, PMS and research, Unicon Financial Intermediaries Pvt Ltd, said.
Deregulation will also send the right signal to private players keen to invest in the oil retailing business and lead to the development of the industry and greater competition in the market, ultimately benefitting fuel consumers. Besides, deregulation should also cheer ONGC's shares. After IOC, the government plans to dilute its stake in ONGC, and it stands to benefit if the company's share price goes up.
Thanks to the auto fuel subsidy regime in place, IOC's stock price has stagnated over the years even as the company saw exponential growth in its revenue. This punishes investors who had bought IOC shares. While the pricing of petrol has been freed and the company can now take its own decision on price determination, diesel pricing is still being regulated by the government. Since sales volume of diesel is much higher compared to petrol consumption in the country, controls on diesel pricing suppress the share value of all oil marketing companies (OMCs), including IOC. The government needs to restore the confidence of IOC investors to realise the true value of its stake in the company before the follow-on public offering.
Valuations aside, deregulation of diesel pricing will also help reduce the petroleum subsidy burden of upstream companies like ONGC and Oil India Ltd. ONGC has to contribute a significant share of its revenue to share under-recoveries of OMCs on diesel sale. For example, ONGC had to shell out as much as Rs 11,554 crore towards sharing OMCs' under-recoveries in 2009-10. The company earned revenues of Rs 60,205 crore in the 2009-10.
Not only that, nobody knows exactly how much ONGC will have to fork out a year, as the final subsidy share is decided by the petroleum ministry at the end of each year.
Freeing ONGC of the subsidy burden would help investors take a view on the company's valuation when the government divests 5% of its stake in ONGC, after the IOC public issue. Globally, international crude oil price is a proxy for an upstream company's profitability. However, this thumb rule cannot be applied to ONGC as it is required to share the petroleum subsidy burden.
The government had opened up the fuel retailing sector with an eye on private investment. However, private players are not keen to invest in the sector since the government continues to subsidise diesel sale. Reliance and Essar, which had entered fuel retailing with high hopes, now find themselves at the receiving end of the government's policy to subsidise diesel. They were forced to shut their retail outlets in 2007-08 when crude oil prices spiked in the international market. These private players have since resumed operations. But world crude oil prices have again started hardening in recent weeks on the improving prospect of global economic recovery. Oil prices have already crossed $80 a barrel and may well hit $100 a barrel soon if the trend continues. In that case, private retailers might be forced to shut their operations once again.
These private players had entered into auto fuel retailing business on the hope that the government would soon end the petroleum subsidy regime. However, that has not happened. The planned IOC public offer would be an opportunity for the government do justice to both public and private sector oil marketers.
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At many places in this website, you shall find links to other websites/portals. The links have been placed for your convenience. IndianOil is not responsible for the contents and reliability of the linked websites and does not necessarily endorse the views expressed in them. Mere presence of the link or its listing on this website should not be assumed as endorsement of any kind. We cannot guarantee that these links will work all the time and we have no control over the availability of linked pages.
When you select a link to an external website, you shall be leaving IndianOil's website and shall be subject to the privacy and security policies of the owners/sponsors of the outside website(s).
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In no event will IndianOil be liable for damages of any kind, including without limitation, direct, incidental or consequential damages (including, but not limited to, damages for lost profits, business interruption and loss of programs or information) arising out of the use of or inability to use IndianOil's website, or any information provided on the website, or in the Products any claim attributable to errors, omissions or other inaccuracies in the Product or interpretations thereof. Some jurisdictions do not allow the limitation or exclusion of liability. Accordingly, some of the above limitations may not apply to the User.
User agrees to indemnify, defend and hold IndianOil harmless from and against all losses, expenses, damages and costs, including reasonable attorneys' fees, arising out of or relating to any misuse by the User of the content and services provided on the Site.
The information contained in the Site has been obtained from sources believed to be reliable. IndianOil disclaims all warranties as to the accuracy, completeness or adequacy of such information.
IndianOil makes no warranty that: (a) the Site will meet your requirements; (b) the Site will be available on an uninterrupted, timely, secure, or error-free basis; (c) the results that may be obtained from the use of the Site or any services offered through the Site will be accurate or reliable.
The User's right to privacy is of paramount importance to IndianOil. Any information provided by the User will not be shared with any third party. IndianOil reserves the right to use the information to provide the User a more personalized online experience.
The Site provides links to web sites and access to content, products and services from third parties, including users, advertisers, affiliates and sponsors of the Site. You agree that IndianOil is not responsible for the availability of, and content provided on, third party web sites. The User is requested to peruse the policies posted by other web sites regarding privacy and other topics before use. IndianOil is not responsible for third party content accessible through the Site, including opinions, advice, statements and advertisements, and User shall bear all risks associated with the use of such content. IndianOil is not responsible for any loss or damage of any sort User may incur from dealing with any third party.
The following terms and conditions will be deemed to have been accepted by the User on usage of the website www.iocl.com. You are requested to read them carefully before you use the services of this site.
The term User shall refer to the user who is browsing the site. The term IndianOil shall refer to Indian Oil Corporation Limited. The term Site refers to www.iocl.com owned and monitored by IndianOil.
By using the Site, you agree to follow and be bound by the following terms and conditions concerning your use of the Site. IndianOil may revise the Terms of Use at any time without notice to you. Areas of the Site may have different terms of use posted. If there is a conflict between the Terms of Use and terms of use posted for a specific area of the Site, the latter shall have precedence with respect to your use of that area of the Site.
IndianOil may terminate User's access at any time for any reason. The provisions regarding to disclaimer of warranty, accuracy of information, and indemnification shall survive such termination. IndianOil may monitor access to the Site.
All content present on this site is the exclusive property of IndianOil. The software, text, images, graphics, video and audio used on this site belong to IndianOil. No material from this site may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in any form without prior written permission from IndianOil. All rights not expressly granted herein are reserved. Unauthorized use of the materials appearing on this site may violate copyright, trademark and other applicable laws, and could result in criminal or civil penalties. IndianOil is a registered trademark of Indian Oil Corporation Ltd. This trademark may not be used in any manner without prior written consent from IndianOil.
IndianOil does not make any warranties, express or implied, including, without limitation, those of merchantability and fitness for a particular purpose, with respect to any information, data, statements or products made available on the Site.
The Site, and all content, materials, information, software, products and services provided on the Site, are provided on an "as is" and "as available" basis. IndianOil expressly disclaims all warranties of any kind, whether express or implied, including, but not limited to, the implied warranties of merchantability, fitness for a particular purpose and non-infringement.
IndianOil shall have no responsibility for any damage to User's computer system or loss of data that results from the download of any content, materials, information from the Site.
IndianOil may change or discontinue any aspect of its website at any time, including, its content or features. IndianOil reserves the right to change the terms and conditions applicable to use of the Site. Such changes shall be effective immediately upon notice, which shall be placed on the Site.
In no event will IndianOil be liable for damages of any kind, including without limitation, direct, incidental or consequential damages (including, but not limited to, damages for lost profits, business interruption and loss of programs or information) arising out of the use of or inability to use IndianOil's website, or any information provided on the website, or in the Products any claim attributable to errors, omissions or other inaccuracies in the Product or interpretations thereof. Some jurisdictions do not allow the limitation or exclusion of liability. Accordingly, some of the above limitations may not apply to the User.
User agrees to indemnify, defend and hold IndianOil harmless from and against all losses, expenses, damages and costs, including reasonable attorneys' fees, arising out of or relating to any misuse by the User of the content and services provided on the Site.
The information contained in the Site has been obtained from sources believed to be reliable. IndianOil disclaims all warranties as to the accuracy, completeness or adequacy of such information.
IndianOil makes no warranty that: (a) the Site will meet your requirements; (b) the Site will be available on an uninterrupted, timely, secure, or error-free basis; (c) the results that may be obtained from the use of the Site or any services offered through the Site will be accurate or reliable.
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GRIEVANCE OFFICER
In accordance with the Indian Information Technology Act 2000 and the rules notified thereunder, the contact details of the Grievance Officer are provided below:
Sh. Abhinav Bhatt,
Corporate Business Technology Centre,
Indian Oil Institute of Petroleum Management Campus,
Plot No. 83, Institutional Area,
Sector 18, Gurugram,
Haryana – 122001
Email: data-grievance[at]indianoil[dot]in
Phone : 0124-2861509
Click here to view IndianOil's Data Privacy Policy (Offline Data Collection).
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CHANGES TO THIS PRIVACY POLICY
The Policy is subject to modifications from time to time. If IOCL decides to change this Policy, IOCL shall publish the modified Policy on its website.
GRIEVANCE OFFICER
In accordance with the Indian Information Technology Act 2000 and the rules notified thereunder, the contact details of the Grievance Officer are provided below:
Sh. Abhinav Bhatt,
Corporate Business Technology Centre,
Indian Oil Institute of Petroleum Management Campus,
Plot No. 83, Institutional Area,
Sector 18, Gurugram,
Haryana – 122001
Email: data-grievance[at]indianoil[dot]in
Phone : 0124-2861509
Click here to view IndianOil's Data Privacy Policy (Offline Data Collection).
Click here to view IndianOil's Data Privacy Policy (Online Data Collection).
CHANGES TO THIS PRIVACY POLICY
The Policy is subject to modifications from time to time. If IOCL decides to change this Policy, IOCL shall publish the modified Policy on its website.
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All content, designs, logos, images, and materials displayed on this website are protected by copyright and other intellectual property laws. Unauthorized reproduction, distribution, or modification of any content from this site is strictly prohibited and may result in legal action.
Prohibition of Design and Layout Replication
We kindly remind our users, visitors, and third parties that replicating, copying, or imitating our website’s design, layout, or any distinctive features without explicit authorization is strictly prohibited. This includes, but is not limited to:
Replicating the visual design or layout of our webpages.
Copying or mimicking our unique combination of colors, fonts, graphical elements, or navigational elements.
Reproducing our website’s structure, organization, or presentation.
Using any automated tools, software, or manual methods to replicate or copy any aspect of our website’s design or layout
Copyright Infringement Notice
We take copyright infringement seriously and will pursue appropriate legal action against those who infringe upon our intellectual property rights.
Conclusion
We appreciate your understanding and compliance with our Copyright Policy. By accessing or using our website, you agree to abide by these copyright protections and refrain from unauthorized replication or copying of our design and layout.
Thank you for visiting!