Indian Oil Corporation Ltd Management Discussions

1. ECONOMIC PERFORMANCE & OUTLOOK

In 2023, global growth remained resilient at 3.2% despite high interest rates and increased incidence of geo-political conflicts, albeit lower than 3.5% growth recorded in 2022. The strong global economic performance benefited from better-than-expected growth in the United States (US). In the US, consumer spending drove GDP growth supported by accumulated household savings, tight job-markets, and expansionary fiscal policy. On the other hand, the euro area, witnessed a tardy growth reflecting weak consumer sentiment, the lingering effects of high energy prices, and weakness in interest-rate-sensitive manufacturing and business investment. In China, growth accelerated to 5.2% in 2023 after hitting the second lowest growth in 40 years of 3.0% in 2022 but remained below expectations and much below its historical (pre-pandemic rates) rates amid a protracted property crisis, sluggish consumer, and business confidence. In contrast, the Indian economy achieved robust growth and surpassed expectation of 6-7% growth by accelerating to 7.8% in 2023-24 from 7.0% in 2022-23. The surge in growth in India was driven by a surge in investment supported by the governments capital expenditure boost and resurgence in manufacturing sector growth despite slowdown in Indian Agriculture due to below normal and uneven monsoons.

There was softening in inflation rates across the globe from the peak of 2022 benefitting from steep descent in commodity prices. India too was able to control inflation despite challenges on the food inflation front.

In 2024, global economy is expected to maintain the economic momentum and grow at broadly the same rates as 2023 and inflation is also expected to continue declining, although downside risks in the form of furthering of geopolitical tensions remain. Interest rates are expected to decline during the year although the pace and quantum would remain contingent on the evolving inflation situation. Indian economy in 2024-25 is expected to remain the fastest growing large economy with GDP growth projected to be 6.8%. The economy would benefit from fiscal rebalancing, increased digitalisation, strong domestic demand, and a good monsoon.

2. GLOBAL ENERGY SECTOR

The year witnessed notable global occurrences. Throughout 2023, the global energy markets experienced volatility amid the ongoing post Covid-19 recovery and disruptions stemming from the Russia-Ukraine conflict and other geopolitical tensions in the Middle East. Additionally, COP 28 emphasised the imperative need for a definitive transition to sustainable energy sources from fossil fuels in energy systems in a just, orderly, and equitable manner to achieve Net-Zero by 2050. COP 28 also recognised the role of "transitional fuels" such as gas in "facilitating the energy transition while ensuring energy security", highlighting the current challenge of balancing energy security with the goal of Net-Zero emissions. Concerns regarding energy security and emissions further propelled the adoption of renewables as the world moves towards a greener future with reduced carbon footprint.

2.1. Oil Market

In 2023, there was a steady rise in global demand for oil, comparable to the rise in 2022. The increase amounted to approximately 2.3 Million barrels per day (mbpd), bringing the total demand to a record high of 102 mbpd. China contributed significantly to this rise, accounting for 1.7 mbpd as the country recovered from COVID-19 restrictions. On the other hand, demand growth in OECD markets, notably OECD Europe, slowed down due to sluggish economic growth.

Looking ahead, in 2024, most of the increase in global oil demand, totalling 78%, is projected to be driven by China, India, and Brazil. This surge is anticipated to propel global oil demand to a record high of 103.2 Million barrels per day.

Global oil supply increased by around 2 mbpd to 102.1 mbpd in 2023 slightly higher than the demand. Robust growth in non-OPEC+ supplies, which increased by 2.4 mbpd in 2023 drove oil supply during the year. Most of the non-OPEC growth came from the USA and Brazil, which accounted for around 1.5 mbpd and 0.4 mbpd increase, respectively. On the other hand, OPEC+ announced a series of compulsory and voluntary output cuts to counter the increase in production from non-OPEC+ countries. During the year, global markets also adjusted to new trade dynamics, with crude oil and refined petroleum products from Russia finding destinations outside the European Union.

During 2023, despite OPEC+ implementing deepened and extended production cuts, international crude oil prices plummeted by nearly 20%. However, heightened volatility characterised oil prices in the latter half of 2023, influenced by both OPEC+ production cuts and the conflict in the Middle East. Brent averaged $83 per barrel in 2023, a decline from $101 per barrel in the previous year. Price for Brent surpassed US$90/bbl in early April 2024 for the first time since October 2023, largely owing to escalating tensions in the Middle East, attacks on Russian refineries and an extension of OPEC+ outputs cuts.

Refining margins in 2023 significantly cooled compared to the highs experienced in 2022, particularly following the Russia-Ukraine war, which saw a surge in middle distillate refining margins. Despite this, refining margins remained relatively strong compared to previous years due to several factors. These included the closure of 4.8 Million barrels per day (mbpd) of refining capacity since the beginning of 2020, limited spare refining capacity, low inventory levels, delays in refinery capacity expansions relative to demand growth, production disruptions exceeding average refinery outages/ turnarounds, and logistical issues arising from disruptions in the Red Sea and Panama Canal.

2.2. Gas Market

Overall, global gas demand remained stagnant in 2023, with a modest increase of only 0.5% or 22 Billion cubic meters (bcm) year-on-year. The Asia Pacific region saw a rise of about 24 bcm, primarily fuelled by China and Indias power and industrial sectors. While North America experienced slight growth in consumption, Europe saw a decline of 36 bcm, reaching its lowest level since 1996 and dropping about 22% below its 2005 peak. The decline in Europe was attributed to reduced electricity usage, greater integration of renewable energy sources, improved efficiency, policy mandates, and a mild winter.

The global liquefied natural gas (LNG) market experienced steady growth as spot prices moderated from highs of 2022. Worldwide LNG trade reached 404 Million Tonnes in 2023, marking a 2.8% y-o-y expansion. Asia, driven by strong Chinese demand, retained its position as the main destination for LNG shipments.

In 2023, the global gas supply remained stable, with the increase in LNG production offsetting the decline in Russian pipeline gas exports. This expansion in supply was particularly focused in certain regions, with the United States emerging as the top LNG exporter globally with exports of 84.3 Million Tonnes, responsible for more than 80% of the incremental LNG supply of 7.2 Million Tonnes in 2023.

Stagnant consumption and increasing natural gas stockpiles led to reduced prices in 2023 compared to 2022. Despite being lower than the previous year, prices remained higher than historical norms and exhibited significant fluctuations. Natural Gas price in Europe averaged $13.1/mmbtu in 2023, a 68% decrease from $40.3/mmbtu in 2022. The U.S. benchmark Henry Hub natural gas price averaged $2.57 per Million British thermal units (MMBtu) in 2023, about a 62% drop from the 2022 average annual price ($6.4/mmbtu). Price continued to show weakness during first quarter of 2024, with Natural gas Europe averaging $8.75/mmbtu, whereas Henry Hub averaged $2.1/mmbtu.

2.3. Low Carbon Energy

In 2023, global annual additions to renewable capacity surged by nearly 50% to nearly 510 Gigawatts (GW), marking the fastest growth rate in the past two decades. Solar photovoltaic (PV) installed capacity soared from 1177 GW in 2022 to 1552 GW in 2023, while wind power capacity saw an addition of 108 GW, reaching 1007 GW in 2023. Much of the capacity addition took place in China, while India, USA, Brazil and EU also witnessed record increases.

Investment in the low-carbon energy transition globally surged by 17% in 2023, surpassing $1.7 trillion. For every dollar spent on fossil fuels, $1.7 was invested in clean energy in 2023, a significant increase from the 1:1 ratio five years ago. This momentum has been predominantly driven by renewable power and electric vehicles (EVs), with notable contributions from other sectors such as batteries, heat pumps, and nuclear power.

3. INDIAN ENERGY SECTOR

India, the worlds 3^rd largest energy consumer, recorded a 7.3% y-o-y increase in its energy demand, in 2023, much above its ten years average of 4.2%.

Indias power demand rose by 7.6% in 2023-24, more than double the 5-year pre-pandemic average (2015-16 to 2019-20) of 3.7%. In addition to resilient economic activity, sub-par and uneven monsoon and heatwaves also drove up electricity demand. In 2023-24, Indias installed power generation capacity increased by 26 GW to 442 GW of which 18.5 GW was of renewable energy (excluding large hydropower), which was a new high for renewable energy capacity addition in the country. The Government of India and State Governments have demonstrated strong support for the renewable energy sector by establishing policies to support growth and setting ambitious renewable energy targets. Indias National Electricity Plan (2022-2032) posits a notable trajectory in the share of renewables (excluding large hydropower) in installed capacity to increase from 32.5% at present to 45.4% by 2026-27 and to 73.4% by 2031-32.

Demand for refined petroleum products grew by 4.6% in 2023-24 driven by solid growth in transport fuels (MS, HSD & ATF), cooking fuel (LPG) and Bitumen. Buoyancy in Indias automobile market, with 10% growth in new vehicle registrations underpinned the growth in demand for road fuels. Overall bullish momentum was seen in Indias transport sector, helping MS demand grow by 6.4% to 37.2 MMT and HSD demand to grow by 4.4% to 89.6 MMT.

Indias aviation sector posted double-digit growth for the third consecutive year with both air traffic and ATF consumption surging past the pre-pandemic highs. The domestic air passenger traffic in India during 2023-24 stood at 154 Million up from 137 Million in 2022-23, with a y-o-y growth of 13%. LPG demand reached record levels of 29.7 MMT in 2023-24 supported by GOIs focus on clean cooking through the Ujjwala scheme.

Natural Gas consumption in India after falling by 5.6% in 2022-23 (due to high LNG prices) posted a robust recovery in 2023-24 with over 10% growth. In 2023-24, there was a surge in domestic Natural Gas production with a 6.1% growth after a slack growth of 1.6% in the previous year. LNG imports after falling by 15% in 2022-23 also posted a turnaround with 21% growth as international spot prices softened. In addition to softening of international LNG prices, there was also softening of prices of domestically produced gas due to the change in domestic gas pricing formula based on the recommendations of Kirit Parikh Committee on Natural Gas Pricing. Indias natural gas sector is witnessing massive wave of investment in supply chain infrastructure with $67 Billion planned to be invested over the next 5-6 years as the nation gears up to meet Governments vision of increasing the share of natural gas in Indias energy mix to 15%.

The Government has set the target of 20% ethanol blending in petrol by Ethanol Supply Year (ESY) 2025-26. Supported by policy interventions in terms of widened feedstocks, provision of concessional finance and infrastructure development by industry, ethanol blending rose to 12.1% (ESY 2022-23) up from mere 4% six years ago in 2017-18. With the objective to draw global spotlight on biofuels as a cost-effective and attainable energy transition strategy especially for other developing countries, on the sidelines of the G20 Leaders Summit, India along with USA & Brazil launched the Global Biofuels Alliance (GBA). GBA is a multi-stake holder alliance consisting of 24 member countries and 12 International Organisations and aims to promote biofuel adoption.

To further solidify its focus on modern bioenergy, during the year, Government announced mandatory blending of Compressed Bio Gas (CBG) in Compressed Natural Gas (CNG) for transport and Piped Natural Gas (PNG) for domestic purposes from 2025-26 in a phased manner reaching 5% from 2028-29 onwards. The Government has approved an indicative target of 1%, 2% and 5% for blending of Sustainable Aviation Fuel in ATF by 2027, 2028 and 2030 respectively, for international flights.

Indian policy makers continue to fortify the flagship Green Hydrogen Mission which targets 5 MMTPA production by 2030 and turning India into a green Hydrogen export hub. In the interim budget for 2024-25, allocation for Green

Hydrogen Mission more than doubled to 600 Crore for 2024-25 as compared 297 Crore allocated in the previous years budget. In addition, during the year, Government of India released guidelines for green hydrogen use in transport sector, shipping sector, and made allocation for pilot projects in steel sector.

Electric mobility in the country is being promoted by a framework of supportive policies. These include financial incentives offered by Central Government through Faster Adoption and Manufacturing of Electric Vehicles (FAME) Scheme, Production Linked Incentive (PLI) for battery manufacturing and auto Industry. In addition, State Governments also offer tax and other benefits in their state-specific EV policies. Besides, improving vehicle (and battery) technology and larger number of OEMs entering the segment with attractive products are also supporting electric mobility in the country. During the year, combined sales of electric vehicles (cars, two-wheelers, three-wheelers, and buses) increased to around 1.7 Million, posting over 40% y-o-y growth.

Another trend worth noting in the Indian transport & energy space is the pick-up in sales of high economy petrol-hybrid cars boosted by rolling out of strong hybrid models by a few of the major OEMs in India. In 2023-24, sales of hybrid cars doubled to over 90,000 up from 41,000 in 2022-23.

4. INDIAS RESILIENT ECONOMY: A WIDE CANVAS OF OPPORTUNITIES

It is widely recognised that this is Indias decade. In fact, India has continuously maintained its momentum as the fastest growing economy. On the back of its fast growth, in the last eight years India has steadily moved up the ranks from being the 10^th biggest in 2014 to the 5^th biggest in 2022. Today, Indian economy is already US$ 3.6 trillion in size and is projected to touch the $ 5 trillion milestone very soon.

In long term, India aims to grow 10 folds, reaching US$ 35 trillion and becoming the worlds second-largest economy by 2047. The growth trajectory will entail a phenomenal leap in Indias per capita income levels from the current level of US$ 2600 to US$20,000 by 2047, placing India in the ranks of developed economies or becoming ‘Viksit Bharat.

This remarkable economic growth trajectory will drive Indias future energy demand, which is set to double over the long-term. Consequently, Indias share in global energy pie, which is currently at 7%, is also expected to reach 13% by 2050. Indias high economic growth underpins growth in Indias energy demand alongside, Indias large and growing population (India overtook China in 2023 as the most populous country in the world) and its low per capita energy consumption also define the scale and significance of the expansion involved. On per capita basis, today Indias energy usage remains at just one-third of the world average, highlighting the nations energy access deficit. Indias journey of energy expansion is also defined by its commitments to decarbonise itself. India has committed to achieving Net-Zero emissions by 2070. At the same time, to address Indias high dependence on imported energy in an increasingly geopolitical unstable world, Energy Independence by mid-century has been woven in as an important tenet of Indias energy expansion & transition journey.

To sustain the growth momentum of the Indian economy and actively pursue its goals of energy access, energy independence, and decarbonisation, India is adopting a balanced and holistic approach towards energy transition. This approach creates growth opportunities across all energy sectors. While new and low-carbon energy sources such as renewable energy, hydrogen, and biofuels are expected to experience the fastest growth, the fundamental need for stable and reliable energy ensures that fossil fuels will also remain crucial and require scale-up.

Indias ambitions and potential for growth and development, alongside its approach for just and orderly transition layout a wide canvass of opportunities for an energy company like IndianOil.

5. INDIANOILS BLUEPRINT FOR GROWTH

In Indias pursuit of achieving developed status, which would inevitably lead to a doubling of primary energy demand, IndianOil, the nations foremost energy facilitator, aims to elevate its contribution to the energy sector from ~9% to ~12.5% by 2050. Its objective is not only to uphold its position as The Energy of India but also to actively contribute to the realisation of Indias vision of becoming a

"Viksit Bharat @2047".

With ‘Nation-First as a core value for the Company, its strategic intent is to meet the growing energy needs of the country in a secure and sustainable manner while also creating value for the stakeholders. The Companys growth blueprint consists of three pillars of "Building a Stronger Core", "Fostering Growth through Integration & Diversification" and "Achieving Net-Zero".

Building a Stronger Core

IndianOil as the flagship refiner in Indias growing market is committed to ensure uninterrupted supplies of refined products to every nook and corner of the country. At present,

IndianOil is undertaking massive capacity augmentation in its crude processing capacity. By 2030, with the ongoing expansions, IndianOils refining capacity is set to increase by a third- taking it from 80.8 MMTPA at present to 107.4 MMTPA (including its subsidiary-CPCL).

The basis of this expansion drive is Indias strong fundamentals and the need to ensure energy security. On the oil demand prospects front, there is a consensus that Indias oil demand will increase throughout this decade and remain above current levels until at least 2040. In India, rising purchasing power and aspiration of consumers and urbanisation will drive increase in vehicle ownership rates, air travel penetration and plastics consumption underpinning continued growth in oil demand, even with growth in electrified transport system. On the other hand, the ongoing Russia-Ukraine conflict, and the outbreak of conflict in the Middle East have sharply refocused global attention on energy security. IndianOil is therefore focussed on meeting Indias growing demand in a self-reliant manner by creating adequate refining capacity. IndianOils refinery expansions are coming at an opportune juncture, amidst the ongoing consolidation in the global refining sector. Since 2020, there have been refinery closures in the developed countries to the tune of 4.8 mbpd refining capacity. On the other hand, worlds large appetite for refined products and increasing challenges in sourcing them have kept product cracks and refinery margins buoyant. This could create an opportunity for products export in the future after meeting buoyant domestic demand.

Simultaneous to refinery expansions, IndianOil is expanding its pipeline transportation infrastructure to improve the availability of products across the country. The Company aims to develop a robust pipeline network spanning over 30,000 kilometers by 2030, up from its current length of approximately 19,750 kilometers.

IndianOil is also expanding its marketing infrastructure consisting of storage facilities and last mile connectivity, at a fast clip. In the last 5 years, the Company has added around 10,000 retail outlets of which over 4000 are rural retail outlets, over 1 MMTPA of LPG Bottling capacity and over 900 LPG dealerships. At present, the Company is implementing marketing infrastructure projects costing over

11,000 Crore for capacity augmentation and construction of new terminals, depots, bottling plants, retail outlets (ROs) and modernisation of existing ROs. These expansions are designed to complement the Companys increased refinery capacity and for ensuring a consistent supply of petroleum products.

The Company is leveraging its research capabilities to enhance Atmanirbharta by producing new product lines. In 2022-23, the Company started producing AVGAS 100 LL, a specialised aviation fuel for two-stroke piston engines used by pilot training schools and military establishments, which was erstwhile available only through imports. Today, the Company is exporting AVGAS 100 LL to countries like Papua New Guinea, Indonesia, and Sri Lanka, positioning India as an exporter of this niche fuel rather than an importer. During the year, the Company strengthened its global market presence further by introducing Reference Gasoline (E-10 & E-20) and Diesel Fuels (B-7), making it one of only three companies worldwide producing this reference fuel and launching FIM (F?d?ration Internationale de Motocyclisme) Compliant Cat 2 Fuel "STORM" for the Asian Road Racing Championship. Further, in the field of catalysts which are essential to chemical processes in the refineries and are invariably imported and expensive, the Company has been focussing in developing in house capabilities. During the year, in a significant milestone, IndianOils first Catalyst Manufacturing Plant (CMU) was commissioned at Panipat Refinery.

Another strand of strengthening the core business is making our intricate and complex supply chain robust and efficient by leveraging the power of digitalisation. During the year, the Company launched its Integrated Planning Tool (IPT). This tool optimises IndianOils extensive supply chain by integrating operations planning across refineries, petrochemical complexes, and distribution networks. IPT is equipped with AI/ML capabilities, offers end-to-end optimisation, making it one of the most sophisticated supply chain solution models in the downstream hydrocarbon industry.

Customer centricity involving provision of high-quality products and services has been the hallmark of IndianOils operations. The ongoing transition in the energy space and changing consumer preferences have emboldened the Company to offer value added products. In the recent years, supported by the efforts of its R&D Centre, the Company has launched eco-friendly fuels. These include XtraGreen Diesel (offers 5-7% fuel economy benefits and ranks among the cleanest diesel fuels globally), XP95, Indias first 95 Octane petrol developed by IndianOil (provides an additional 3.95% fuel economy) and XtraTej LPG for commercial cooking (delivers up to 7.5% savings in LPG consumption and reduces cooking time). In addition, R&D on lube technology front has led to development of lubricant products like SERVO Greenmile, SERVO Raftar, and SERVO 4T Green contribute to higher vehicle fuel economy. These branded fuels have garnered a strong and loyal customer base, with XP95, XG, and XP100 available at over 11,000, 6,900, and 170 retail outlets (as on 31.03.2024), respectively, and their popularity continues to grow.

The Company has been constantly evolving its offerings in terms of products, services and experience to serve its customers better. To make LPG more accessible to migrant labourers, daily wager and hawkers the Company has already rolled out Munna

(2 Kg) and Chhotu (5 Kg) Free Trade LPG cylinders equipped with cooktops. Further, in view of changing mobility preference of customers, the Company is transforming its retail outlets into Energy Stations. These Energy Stations are envisioned as comprehensive energy solutions along national highways and green expressways, offering a range of fuel options including conventional transport fuel, LNG, CNG, and charging stations for EVs. The Companys CRM solutions have been embedded across its petroleum and petrochemicals marketing segments and it already has a customer centric Digital Platform ‘ePIC (electronic Platform for IndianOil Customers) which provides unified customer experience for all its line of business.

Fostering Growth through Diversification & Integration:

To become an integrated and resilient company of the future, the Company entered Exploration & Production and Petrochemicals business over two decades ago. The journey continued with sizeable investments in the supply chain of the cleanest hydrocarbon i.e., natural gas. Today, the Company has created significant portfolios in each of these and opportunities ahead in terms of growth prospects and policy support. The importance of these business lines to overall vitality of the Company are driving future growth in these areas. In the upstream space, the Company has a carefully curated portfolio of assets including oil, gas and CBM spread across India and abroad. Currently, the Company holds a portfolio of 29 upstream assets, including eight producing assets.

The Company is operating one overseas and one domestic block. The current annual hydrocarbon production stands at 4.25 Million metric tons of oil equivalent (MMTOE) and the Company is working steadfastly to increase this to 11 MMTOES by 2030. In this pursuit, the Company is actively exploring opportunities both in India and abroad, leveraging various licensing policies and farm-in opportunities.

In the Petrochemical space, the Company has established a significant presence in the Indian petrochemical sector, with a production capacity of 4.277 Million metric tons per annum, representing 6.1% of the Petrochemical Intensity Index (PII). The Company is on a major petrochemicals expansion drive as it strives to take up a bigger share in Indias growing petrochemicals market. Projected to expand at a compound annual growth rate (CAGR) of 8-10% over the long term, the Indian Petrochemical Industry is poised for substantial growth, driven by Indias sturdy macro fundamentals, population expansion and presently low per capital polymer consumption. These factors serve as significant catalysts in positioning India as a key petrochemical manufacturing hub.

The Company aims to enhance its Petrochemical Intensity Index (PII) to 15% by 2030 with petrochemicals expansions integral to all refinery expansions. The Companys petrochemicals strategy, which is primarily based on utilisation of captive feedstock aims to capitalise on both volume and value growth prospects by expanding sourcing options, while concurrently optimising refinery utilisation during periods of decreased fuel demand.

Notably, the Company plans to invest over 61,000 Crore for the construction of a petrochemical complex in Paradip, Odisha, to bolster Indias self-reliance in this sector. Alongside, the Companys R&D is persistently working in making refinery operations agile by working on technologies that enable diversion of road transport fuel streams to petrochemicals production including niche grades such as specialty chemicals, industrial/intermediate chemicals, and bio-polymers.

Another key focus area for the Company is recyclates, having introduced CYCLOPLAST, its brand of polymer recyclates. While petrochemicals help lock in carbon, promoting carbon-neutral hydrocarbon usage, the increasing pollution from plastics is an undeniable issue. Therefore, alongside its growing presence in petrochemicals, the Company is upholding its legacy as a responsible supplier by addressing plastic pollution. The Company is championing circularity through its entry into recyclates. IndianOil also undertook the Unbottled initiative – a brand of sustainable garments launched for merchandise made from recycled polyester. The ‘Unbottled campaign aims to convert 100 Million PET bottles annually into uniforms for our on-ground teams and other stakeholders.

The Company is a major player in Indias Natural Gas market, with its presence deeply entrenched across the natural gas value chain and commanding a share of 13% in Indias natural gas market. Government of India aims to increase share of natural gas in its energy mix from around 6% at present, (which is way below the world average of 22%) to 15% and towards this, massive investments in building gas storage, supply and distribution infrastructure are underway. The Companys strategic vision includes ambitious plans to expand its sales portfolio by three to four times by the end of the decade by continued investments in natural gas infrastructure ranging from RLNG terminals, cross country pipelines, to City Gas Distribution (CGD) networks and LNG stations. The Company is expanding its natural gas pipeline network to ~3,700 Kms by adding ~2,400 Kms to its current length of 1,300 Kms. It is also planning to expand the capacity of Ennore LNG Terminal from 5 MMTPA to 10 MMTPA to meet the growing demand for liquefied natural gas (LNG). Simultaneously, the Company is developing CGD network in 49 GAs across the country, awarded through PNGRBs bidding rounds. An integral part of the Companys natural gas growth plan is to align it with the Companys target to achieve Net-Zero emissions by 2046, driven by the accelerated adoption of natural gas as a low-carbon transitional fuel in its refineries.

In addition to supplying natural gas to traditional sectors like refineries, fertilisers, CGD, etc., IndianOil is also working with Industry partners & Regulatory bodies under the guidance of MoPNG & PNGRB, towards creating ecosystem for LNG as transport fuel. Natural Gas, having 20-22% less carbon dioxide emissions and negligible SOx & PM emissions compared to Diesel, has the potential to be a successful solution to the current predicament of emissions from hard to abate sector of road freight. Recognising LNGs potential as a vehicle fuel, the Company is establishing 16 LNG stations along major highways, including the golden quadrilateral and national highways. Since June 2023, the Company has been selling LNG from its first retail outlet in Sriperumbudur. However, navigating this new sector presents challenges, necessitating support for vehicle and LNG supply ecosystem development.

The Company has a well-balanced sourcing strategy consisting a mix of long-term contract and spot purchase to ensure affordable supplies and mitigate price fluctuations. In this context, the Company has secured deals with ADNOC (HOA signed) and TotalEnergies (SPA signed) for long term supplies beginning from 2026.

The Company has legacy portfolios in cryogenics and explosives, which are being nurtured carefully to take advantage of the emerging growth opportunities. The Company ranks among the leading manufacturers of cryogenic containers nationwide. Anticipated expansion in LNG across industries and as transport fuel is expected to provide significant opportunities for increased utilisation of cryogenic equipment. Further, cryogenics are also essential in facilitating various applications of hydrogen, given that storing liquefied hydrogen requires storage at extremely low temperature. Energy transition is expected to unfold new areas for usage of cryogenic vessels and cylinders and the Company is gearing up to tap these opportunities.

The Company holds leadership position in Indias bulk explosives sector and is a major supplier to Indias coal mining sector. With coal demand and production set to increase in the times to come in line with Indias holistic energy growth strategy, opportunities abound for growth for Companys bulk explosives business. The Company is implementing both brownfield and greenfield capacity expansions and pursuing strategic partnerships with national and international collaborators as part of its long-term strategy of being a leading dependable supplier in the industry.

A key aspect of the Companys strategy is to tap overseas growth opportunities in the neighbourhood and beyond. The Company has well established downstream oil subsidiaries in Sri Lanka, Mauritius and UAE and joint venture companies in Bangladesh and Nepal. The Company continued export of products including Gasoil, Jet A1, Gasoline, AVGAS and Sulphur primarily to Bangladesh, Sri Lanka, and Indonesia. The Company is the sole supplier of all major petroleum products to Nepal since 1975, governed by a General Supply Agreement renewed every five years, the latest one being valid until March 2027. The Company is currently exploring opportunities in the natural gas sector in Bangladesh through its joint venture and also exploring downstream fuel retailing opportunities in Saudi Arabia.

Achieving Net-Zero

The Company has committed to becoming Net-Zero by 2046 in terms of operational (Scope 1 & 2) emissions.

Investment of over 2.5 Lakh Crore by 2046 is envisaged to meet this target. IndianOils refineries will be the focus area for which a comprehensive plan focused on mitigation and offsets has been chalked out. Main pillars of mitigation efforts are energy efficiency (enhancing furnace and boiler efficiencies), switching from liquid fuels to natural gas, renewable energy, CBG, and green hydrogen.

Refineries worldwide are among the largest stationary sources of emissions, making the decarbonisation of their operational emissions a critical priority. Beyond this obligation, Net-Zero transition presents significant opportunities in areas of green hydrogen, renewable energy, modern biofuels, and electric mobility, amongst others. IndianOil aims to establish leadership positions in key energy transition technologies like green hydrogen and modern biofuels in the long term and contribute to the national Net-Zero 2070 target.

Green hydrogen is seen as a vital component of global Net-Zero future and is also seen as a critical element of for strengthening national energy security. The Indian

Government has been very actively putting in place policy and incentive structure for green hydrogen production in India. There are natural synergies for refiners to get into green hydrogen production. Current global hydrogen production is around 100 Million Tonnes annually and is concentrated in refining and industrial applications. For refineries, hydrogen production is an essential requirement for desulphurisation and other processes and a major source of carbon emissions. IndianOil as the largest refiner in the country is today also the biggest producer and consumer of hydrogen in India. In the context of the Companys Net-Zero target, it plans to convert fully to green hydrogen over the long term away from fossil fuel-based hydrogen. To start with, IndianOil plans to set up a 10 KTA green hydrogen plant at Panipat. Subsequently by 2030, the Company plans to create 350 KTA of Green Hydrogen capacity, which would be 50% of its total hydrogen generation capacity. The Company is focused on various aspects of the green hydrogen supply chain and is forging alliances, collaborating, and investing in R&D in this pursuit. The Company along with L&T and ReNew has incorporated a joint venture company GH4India Pvt. Ltd., to focus on green hydrogen projects and its derivatives. In addition, the Companys R&D is working on various innovative hydrogen production technologies such as Oxy-steam biomass gasification-based hydrogen generation, solar powered electrolyser-based hydrogen generation. The Company is also working on conversion of existing natural gas pipelines for transportation of hydrogen blended natural gas. The Company demonstrated its leadership aspiration in green hydrogen space, by launching Indias first Green Hydrogen fuel cell bus during the year and is currently operating 15 fuel cell buses in the Delhi-NCR region.

India is one of the fastest growing markets for renewable energy and shifting to RE based electricity generation is a crucial tenet of Indias decarbonisation efforts. The Company plans to build a renewable energy portfolio of 31 GW by 2030 by developing large scale renewable energy capacities for serving its captive power demand and with focus on market demand opportunities. During the year, the Company formed a Joint venture Company NTPC Green Energy Private Ltd. to develop grid and/ or off-grid renewable energy-based power projects.

Biofuels are crucial low carbon sources of energy which fulfill dual objectives of energy security and sustainable development. In India the biofuel sector is amidst a revolution, revitalised by Government of India through a series of strategic interventions. Biofuels production and use is in India guided by the National Policy on Biofuels (2018) amended in 2022. The mandate is of 20% ethanol blending by 2025-26 and 5% biodiesel blending by 2030. IndianOil is fully committed to Indias biofuel vision and sees this as an area of immense opportunity. The Company has been proactively addressing supply chain and feedstock issues by adopting a multimodal transportation (rail and pipeline in addition to the conventional road transport) model for ethanol, lining up adequate ethanol manufacturing capacity and by providing additional incentives to distilleries over and above Government incentives. The Company is in full readiness to meet the Government of Indias mandate for increasing ethanol blending in petrol to 20% by 2025-26.

The Company is also investing in advanced biofuels and has set 2G & 3G ethanol projects based on paddy straw and refinery off gases, respectively. Bio-based Sustainable Aviation Fuel (SAF) is seen as the most promising solution to decarbonise the aviation sector. The Government of India intends to achieve 5% SAF blending for international flights by 2030. IndianOil is leading from the front in development of SAF production in India. The Company is collaborating with global technology leaders like LanzaJet, and Praj for setting up SAF plants in India.

Another significant bioenergy source that the Company is focusing on is Compressed Bio Gas (CBG). Government of India is promoting CBG through its ‘Sustainable Alternative Towards Affordable Transportation (SATAT) scheme to encourage entrepreneurs to set up CBG plants, produce & supply CBG to Oil Marketing Companies (OMCs) for sale as automotive & industrial fuels. The government has also mandated 5% CBG blending in CNG/PNG under CBG Blending Obligation (CBO) from 2028-29 onwards. IndianOil is the lead implementation agency for SATAT under which Letters of Intent (LoIs) are issued to entrepreneurs for setting up plants for supply of CBG to Companys retail outlets and direct customers. In addition, the company is also setting up 30 CBG plants through its Joint Venture Companies. Given the green credentials of CBG, IndianOil is also exploring CBG based hydrogen production as part of its Net-Zero Plans.

The imperatives of Net-Zero transition are transforming the global mobility landscape with focus on low carbon transportation. Availability of adequate charging infrastructure is a pre-requisite for growth in the EV penetration. The Company has established over 9000 EV charging stations and 91 battery swapping stations to bolster the development of electrified transport systems nationwide. The Company sees immense potential in the battery swapping model in view of Indias large and growing electric two-wheeler and three-wheeler base. The Company is joining hands with Sun Mobility, which is a global leader in providing energy infrastructure and services, to form a joint venture company for battery swapping. The Company has also ventured into the battery manufacturing sector to tap opportunities presented by this growing sector and to contribute towards ‘Atmanirbharta. The Company has a joint venture, ‘IOC Phinergy Private Limited (IOP) for Aluminium-Air Batteries and is working towards formation of a joint venture with Panasonic for manufacturing of cylindrical lithium-ion cells in India.

The Company recently took a significant step towards accomplishment of its vision to build a strong green energy portfolio, with the formation of a Wholly Owned Subsidiary Company- Terra Clean Ltd., to undertake Low Carbon, New,

Clean and Green Energy businesses. Terra Clean Ltd. would invest in cutting-edge technologies to create a more efficient, sustainable, and low-carbon energy ecosystem in India. Its focus is on renewable energy sources, such as solar, wind, hydro, electric vehicle, green hydrogen and bioenergy, which will help India achieve its Net-Zero targets while also meeting the growing energy demands of the country.

IndianOils R&D Centre has been the hub of innovation for more than five decades not only in core areas of Lubricant, Refining, Petrochemicals and Pipeline technology but also in areas of bioenergy, solar energy, hydrogen, and nanotechnology. In line with the imperatives of Net-Zero transition, the Companys R&D is gearing up to take a massive leap. The Company is setting up a new R&D campus, with an estimated budget of over H 3000 Crore with focus on four new Centres of Excellence: Alternative & Renewable Energy, Corrosion Research, Nanotechnology, and Synthetic Biology. The state-of-the-art new R&D centre will enhance the Companys efforts in new product development, creating efficient and cost-effective technologies to proving Competitive edge and pave growth path for the future.

6. RISKS AND CONCERNS

Organisations worldwide are grappling with an increasingly complex risk environment, exacerbated by a series of disruptions starting with the onset of the Covid-19 pandemic. The Russia-Ukraine conflict continues and has been followed by increased geopolitical tensions in the Middle East and disruption of key shipping routes. Concurrently, rising global temperatures and the imperative of achieving Net-Zero emissions have further intensified the intricacies of the landscape.

The geopolitical landscape has once again underscored the significance of energy security. As the leading energy provider for the nation, IndianOil recognises its obligation to safeguard energy security. To this end, the company is dedicated to augmenting its refineries capacity to process a broader spectrum of opportunity crudes and strategically broadening its sources of supply. During 2023-24, IndianOil took significant steps by adding 6 new grades into its crude basket, which now encompasses 253 grades sourced from diverse regions such as Africa, the Middle East, the Americas, and Russia, among others.

The Company remains steadfast in its commitment to navigating the expanding risk matrix with heightened resilience and proactive measures. Identified major risks across various business segments and functions are methodically tackled through continuous mitigation strategies. Risk assessment and management are conducted at multiple levels, employing both top-down and bottoms-up approaches. This comprehensive strategy encompasses the enterprise as a whole, the business units, the functions, the market share and projects, ensuring a thorough and proactive approach to risk management.

The risks identified by the Company inter-alia include:

Economic risks arising from international crude oil and products market fluctuations;

Financial risks such as foreign exchange rate fluctuations, exposure to borrowings;

Competition risks arising from competitors within the existing businesses and from new businesses such as alternative energy sources, electric mobility;

Operational risks such as pilferages, labour unrest, unplanned shutdown of refineries;

Security and fraud risks, including cyber-security, data leakage and physical security risks;

Reputational risks such as brand value risk;

Environmental risk arising from the impact on the environment from our business activities and increase in compliance cost in view of the emerging regulations;

Compliance risks arising from tax disputes and litigation; and

The risk of change in Government policies impacting profitability and ability to do business

The energy transition offers opportunities but also comes with inherent risks, notably the potential for a disorderly transition. Such disorderliness can lead to insufficient future supplies, causing extreme price fluctuations and supply disruptions.

Moreover, with increasing scrutiny on Environmental, Social, and Governance (ESG) factors, both globally and within India, the Company has expanded its risk assessment to encompass environmental impacts. This includes evaluating the greenhouse gas (GHG) emissions impact (SCOPE 1 & 2) as well as assessing the water footprint associated with its operations. By incorporating these additional dimensions into its risk analysis, the Company demonstrates its commitment to addressing broader ESG concerns and promoting sustainable practices.

7. FINANCIAL REVIEW

During 2023-24, the Company recorded the highest ever Net Profit of H39,619 Crore, since its inception. The Company set new records with the best-ever physical performances in annual crude throughput, pipeline throughput and in annual sales volume. The Company also achieved all time high petrochemicals sales volume during the year. The capital expenditure of H42,236 Crore

(including investments in joint ventures & subsidiaries) during the year is the highest-ever incurred by the Company, which reflects its commitment to the development and expansion of energy infrastructure in the country.

The Standalone Financial Performance of the Company and the various Segments is summarised below:

( H in Crore)

Particulars	2023-24	2022-23	Variation
Revenue from Operations	8,66,345	9,34,953	-68,608
Earnings before Interest, Tax, Depreciation & Amortisation (EBITDA)	74,182	28,488	45,694
Profit before Taxes	52,344	9,698	42,646
Profit after Taxes	39,619	8,242	31,377
Borrowings	1,16,496	1,32,495	-15,999
Revenue from Operations (Segment Wise)
Petroleum	8,03,127	8,79,223	-76,096
Petrochemicals	26,187	22,259	3,928
Other Businesses*	37,031	33,471	3,560
Earnings before Interest & Tax (EBIT) (Segment Wise)
Petroleum	55,177	12,276	42,901
Petrochemicals	-344	-181	-163
Other Businesses*	789	1,729	-940
Other un-allocable (expenditure)/income-net	4,050	2,806	1,244

*Other Businesses comprise of Gas, Oil and Gas Exploration Activities, Explosives & Cryogenic Business and Wind Mill & Solar Power Generation.

Standalone Financial Performance

In 2023-24, the Revenue from Operations was H8,66,345

Crore as compared to H9,34,953 Crore in the previous Financial Year. The decrease in revenue can be primarily attributed to decrease in product prices in international market. The Asset Turnover Ratio has declined from 2.33 times to 1.99 times as Revenue from Operations has decreased during the year.

The Net Profit for 2023-24 was H39,619 Crore as compared to H8,242 Crore during previous year. The increase in EBITDA,

Operating Profit and Net Profit Margin is mainly on account of normalised marketing margin and lower exchange losses during the year as compared to previous year.

In 2023-24, the companys EBITDA margin was at 8.56%, the Operating Profit margin was at 6.34%, and the Net

Profit margin was at 4.57%. These ratios depict significant increase as compared to the previous year when the EBITDA margin was 3.05%, the Operating Profit margin was 1.11%, and the Net Profit margin was 0.88%. Due to increase in profitability and decrease in borrowings as compared to previous year, the Companys Return On Average Capital Employed registered an increase from 6.19% to 20.17%.

At the beginning of the year, crude prices were around $84 per barrel. It increased to $97 per barrel in September 2023, before settling at around $86 per barrel by year-end. The average HSD crack spread decreased significantly from $35/bbl in previous year to $19/bbl during the year with high volatility and even touched a low of $5/bbl at the end of April 2023. The average MS crack spread which was about $8/ bbl in the previous year remained broadly at the same level of $7/bbl during the year.

The Singapore benchmark for the Refining Margin decreased during the year on account of the lower spread between international prices of petroleum products and crude. As can be seen from above chart, the Companys normalised refining margin (i.e. normalised GRM) during the year has moved in tandem with the international margins. Normalised GRM of the Company decreased from US$ 20.14/bbl in 2022-23 to US$ 11.44/bbl in 2023-24 compared to the decrease in the Singapore GRM from US$ 10.77/bbl to US$ 6.61/bbl. The inventory holding by the Company was high on account of inland refineries, due to which inventory gain/loss becomes significant during a fluctuating price scenario and hence, greater volatility was seen in reported margins.

The Current Ratio of the Company broadly remained at the same level as in the previous year, indicating a consistent balance between current assets and liabilities. Decrease in borrowings led to the decrease in the Companys Debt-to-Equity ratio from 0.98 times to 0.66 times. On account of improved profit during the year, there is significant improvement of Interest Coverage Ratio from 3.39 times to 9.08 times. The Debt Service Coverage ratio also experienced an increase from 1.30 times to 2.17 times. The inventory-holding period was about 48 days and Companys average collection period was 6 days.

The Company paid a final dividend of H4,132 Crore for the Financial Year 2022-23 and an interim dividend of H6,886

Crore for Financial Year 2023-24 during the year. The Companys Earnings Per Share (EPS) for the year 2023-24 stood at H28.77 as compared to H5.98 in previous year. The Board of Directors has recommended a final dividend of H7.00 per equity share for 2023-24, subject to approval by the members of the Company in the Annual General Meeting (AGM), in addition to the interim dividend of H5.00 per equity share paid during the year. Detailed financial indicators and ratios for the last five years are provided in the section ‘Performance at a Glance forming part of the Integrated Annual Report.

Group Financial Performance

The Groups Revenue from Operations for the year amounted to H8,81,235 Crore as compared to H9,51,410

Crore in the previous year. The Net Profit of the group for the year increased to H43,161 Crore from H11,704 Crore in previous year due to the same factors which contributed to increased profitability on standalone basis. The information on contribution by each of the group company is provided in Note 46 of Consolidated Financial Statements.

The financial detailed performance of our material subsidiaries, Joint Ventures and Associates is provided in Note 33A and 33B of the Consolidated Financial Statements. During the year, our subsidiary Chennai Petroleum Corporation Limited reported Net Profit of H2,745 Crore and Total Comprehensive Income of H2,748 Crore. Lanka

IOC PLC (a subsidiary in Sri Lanka) reported Net Profit of Sri Lankan Rupees 1,394 Crore and a Total Comprehensive Income of Sri Lankan Rupees 1,437 Crore, which, after adjustments as per Ind AS, translated to Net Profit of H445 Crore and Total Comprehensive Income of H555 Crore In the category of Joint Ventures, Indian Synthetic Rubber Private Limited achieved Net Profit of H 198 Crore and Total Comprehensive Income of H199 Crore and Indian Oil Petronas Private Limited achieved Net Profit of H326 Crore and Total Comprehensive Income of H326 Crore. Further, Hindustan Urvarak and Rasayan Limited recorded Net Profit of H1,324 Crore and Total Comprehensive Income of H1,325 Crore and the associate, Petronet LNG Limited achieved Net Profit of H3,652 Crore and Total Comprehensive Income of H3,646 Crore.

8. INTERNAL CONTROL SYSTEMS – PROCESS EXCELLENCE

The Company has an established Internal Control Systems which inter-alia include various policies as well as detailed manuals, which cover almost all the aspects of the business. The internal processes and policies are reviewed from time to time to align them with the changing business requirements. Organisation-level controls, Operational-level controls, anti-fraud controls and general IT controls have been put in place to ensure that business operations are carried out efficiently and effectively and chances of errors/frauds are minimised. The internal control systems are commensurate with the size and operations of the Company. The Company has an independent Internal Audit Department, headed by an Executive Director, who reports to the Chairman. The Department has officers from Finance as well as other various technical functions. The audit assignments are carried out as per the Annual Audit Programme approved by the Chairman and the Audit Committee. The Internal Audit carries out extensive audits throughout the year covering every business process. The Statutory Auditors are also required to issue the Independent Auditors Report on the Internal Financial Controls over Financial Reporting for the Company under Clause (i) of Sub-Section 3 of Section 143 of the Companies Act, 2013. The report issued thereupon is attached to the Standalone and Consolidated Financial Statements respectively. The Audit Committee carries out a detailed review of the Financial Statements and deliberations with the Internal Auditors and Statutory Auditors before the same is recommended to the Board for approval.

9. HUMAN RESOURCES

The Company always believes in holistic and meaningful employee engagements and the development of its human resources. The Company engages with the employees to tap their potential for the growth of its business. It assigns great importance to develop its human resources with a focus on its Core Values, which has been revitalised by adding a fifth value of "Nation-First" to the existing values of Care, Innovation, Passion and Trust. The HR systems and practices of the Company focus on diversity and inclusion in all initiatives to build a cohesive workforce. The challenges surrounding the present competitive and dynamic business scenario can be best mitigated by a workforce which is motivated, adaptive to change, innovative and quick in learning. Learning forms an integral part of the growth and enrichment of the workforce. Integrated HR practices through focused recruitment, career path and learning and development have contributed to the future readiness of the workforce. The Company has a structured and robust succession planning framework for the identification and development of talent for the leadership pipeline. The Company has not only groomed several visionary leaders who led and transformed the Company over the years but also groomed leaders for both the public and the private sectors.

10. IR CLIMATE – COLLABORATIVE VALUE

The industrial relations (IR) climate in the Company has traditionally been harmonious. A collaborative IR climate has been maintained in the Company over the years. The Company ensures that the changes in its business environment, strategy & business models, the resultant impact on the current business and the people, along with future plans are regularly shared with the collectives and their views and suggestions are taken into consideration. Regular structured meetings are held between the management and the collectives to discuss and deliberate on issues like productivity, welfare and the need to build a responsive and responsible organisation. The collectives have always steadfastly supported the management in overcoming challenges faced by the Company.

As of March 31, 2024, the employee strength of the Company was at 30,321, which comprised 18,570 executives and 11,751 nonexecutives, including 2,726 women employees.

11. OTHER INFORMATION

The details regarding the Companys CSR activities, environment protection and conservation initiatives, technology absorption and adoption efforts, renewable energy initiatives, foreign exchange earnings & outgo, energy conservation, etc. are provided in the Directors Report and its Annexure.

12. CAUTIONARY STATEMENT

The information and statements in the Managements Discussion & Analysis regarding the objectives, expectations or anticipations may be forward-looking within the meaning of applicable securities, laws and regulations. The actual results may differ materially from the expectations. The various critical factors that could influence the operations of the Company include global and domestic demand and supply conditions affecting the selling price of products, input availability and prices, changes in Government of India regulations/tax laws, economic developments within the country and factors such as litigation and industrial relations.