Indian Oil Corporation: Stock soars 20 per cent in a month with increase in utilization

On Friday, energy major, Indian Oil Corporation Limited (IOCL) revealed the impact of the lockdown situation on its financials and operations, adhering to the recent mandate issued by SEBI. It stated that none of its refineries had been closed and that it had been working with a 39 per cent capacity utilization rate.

As was anticipated, the sale of aviation turbine fuel fell as much as 91.5 per cent during April. On the other hand, the demand for motor spirit and high speed diesel dropped by 61 per cent and 56.7 per cent respectively.

The company witnessed utilization rates of as low as 39 per cent during the lockdown period. Fortunately, with the resumption of economic activities in the later parts of April and in May, its utilization increased to about 75 to 80 per cent. These numbers are still much lower than the average of the previous three reported numbers by the company. Historically, i.e. between FY17 and FY19, the company had maintained its capacity utilization rates in the range of 90 to 94 per cent.

IOCL is among the market leaders in the oil refining segment with more than 50,000 marketing touch points to cater to different product mixes. Thus, the restart of economic activity is expected to certainly give some relief to both, the company and the investors.

Its stock price has already begun to show good gains after the lockdown restrictions were further relaxed on May 17. Between May 18 and June 04, 2020, the stock jumped 20 per cent against a 13 per cent rise in the benchmark index, Sensex.