New Delhi: State-owned Indian Oil Corp (IOC) on Thursday reported a 83 per cent drop in second quarter net profit on the back of slump in refinery margins and inventory losses.

Net profit in July-September at Rs 564 crore was 82.6 per cent lower than Rs 3,247 crore net profit in the year-ago period, IOC Chairman Sanjiv Singh told reporters here.

"The major reason for the decline in net profit was inventory losses in Q2 as against inventory gain during corresponding quarter of previous year," he said.

The company earned USD 1.28 on turning every barrel of crude oil into fuel in July-September as compared to gross refining margin of USD 6.79 per barrel in Q2 of previous fiscal.

Without accounting for inventory losses, the GRM was USD 3.99 per barrel.

He said the company recorded an inventory loss of Rs 1,807 crore in the quarter as opposed to an inventory gain of Rs 2,895 crore.

A company suffers inventory loss when it buys raw material (crude oil case of IOC) at a particular price but by the time it is able to ship it and process it into fuel, global rates would have fallen. Because pump rates are benchmarked at prevailing international rate, it books an inventory loss. Inventory gain are booked if reverse happens.

He said the company also had a forex loss of Rs 1,135 crore in the second quarter.

Turnover slipped to Rs 1.32 lakh crore from Rs 1.51 lakh crore due to dip in prices.

Petroleum product sales was 21.4 million tonnes, while refinery throughput was 17.5 million tonnes in the September quarter.

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