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green is the colour for Indian Oil

green is the colour for Indian Oil

the fossil fuel giant’s renewable energy bets could make it a must-have stock
February 25, 2022
5 min read
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after the heady run through virtually all of last year, 2022 has come as a reality check for investors. a confluence of factors has led to a sea of red across global markets, leaving them little choice but to turn their misery into memes on Twitter. but every cloud has a silver lining. even the pandemic resulted in a boom for certain categories of companies, such as at-home delivery. similarly, the present situation - tensions in Ukraine, rising inflation across the globe, impending interest rate hikes from central banks - also appears to be favourable for a couple of sectors. in the Indian market, for year-to-date (YTD) 2022 as of February 21, only three sectoral indices in the Nifty were in the green: Bank, Auto, and Energy.

one stock in particular, from the last of those three, has been making some eye-catching moves that might add to its positive momentum. what has the Indian Oil Corporation (IOC) been up to?

adapt, improvise, overcome

there is no denying that the electric vehicle (EV) revolution is well and truly underway. the spark that Tesla lit has imbued all major automakers with a burning desire to introduce EV models of their own, across the range, from two-wheelers to commercial vehicles. there are countless dedicated startups building their own EV products as well. but it has become abundantly clear through the competitors who have successfully managed to challenge Tesla’s dominance (particularly in China) that the infrastructure for charging these vehicles will be an extremely important part of this revolution.

this is where IOC, with its existing network of fuel pumps, is at a great advantage. it is pressing home that advantage by already having installed over 1,000 EV charging stations and planning an increase to 10,000 over the next three years. to put this into perspective, Tesla only operated around 1,200 charging stations in the USA as of November last year. further, IOC is also staying ahead of the curve on the production of green Hydrogen which is used as a processing fuel in several industries to produce finished products. it has declared a policy to cut the cost of green Hydrogen production by 40-50%. one might be reminded of the similar ambitions of Mukesh Ambani.

cruise control

these measures do not, however, mean that its main business is suffering in the least. for the latest reported quarter (October to December), IOC reported a 19% jump in net profit over the corresponding year-ago period, at Rs 5,861 crore. it should only go from strength to strength for the ongoing quarter, as the rise in crude oil prices (due to tensions in Ukraine) trickle down into the Indian market. IOC has also found it breezy to raise Rs 1,500 crore via five-year bonds despite offering a slightly lower interest rate than Indian sovereign bonds. this is a measure of the faith in the company’s future.

for a company whose revenues are largely based on fossil fuel, IOC is showing that it is no fossil itself. by planning ahead and itself tapping into the routes that potential challengers might take, it is setting the path for sustained growth. perhaps that will trickle over to its stock as well.