Projects to maintain market position

Indian Oil Corp (IOC) is expected to invest Rs.250-Rs.300 billion a year over the next five years, according to a forecast by an international consultancy Fitch Ratings.

Fitch said it expects IOC capex to remain high to upgrade refineries to meet new emission standards (BS-VI) and to expand refining and petrochemical capacity, including the expansions underway.

“In our view IOC’s ongoing investments are likely to help maintain the company’s dominant market position,” said Fitch in a company assessment on 3 Jan 2019.

IOC has 80.7 million tonnes per annum of refining capacity, 33% of the total in India and operates 11 of the 23 refineries in the country.

IOC also has a 49% share of the country’s crude and product pipeline by length and 44% share in petroleum products with over 48,170 customer touch points.

Fitch assesses IOC’s status, ownership and control by the sovereign as ‘Strong’ as it is directly owned by the state with 54% stake.

“We view the support track record and the likelihood of state support, if needed, for IOC as ‘Strong’.

“IOC has received tangible support from the state in the form of subsidies to meet under-recoveries on products sold below market prices. The subsidies are approved by parliament.

“It has also received indirect government support for its upstream acquisitions outside the country,” said the consultancy.

Citing these key drivers, Fitch Ratings has assigned IOC’s (IOC, BBB-/Stable) US-dollar-denominated notes an expected rating of ‘BBB-(EXP)’.

The notes will rank pari passu with other senior unsecured borrowings of IOC. The final rating on the notes is contingent upon the receipt of documents conforming to information already received.

The rating of the notes is in line with IOC’s Long-Term Issuer Default Rating of ‘BBB-‘ as they will be direct, unconditional and unsecured obligations of the company. fiinews.com