IOC Revival Plan Hurt by Iran Sanctions

IOC Revival Plan Hurt  by Iran Sanctions
IOC Revival Plan Hurt  by Iran Sanctions

Indian Oil Corp (IOC), the country's biggest refiner, is exploring options including a merger to save loss-making unit Chennai Petroleum Corp (CPCL). However, CPCL's attempts to raise funds have been constrained due to a 15.4 percent stake held in it by a unit of Iran's Naftiran Inter Trade Co Ltd (NICO), its chairman B. Ashok said.

Western sanctions against Tehran due to its nuclear program have made businesses difficult for companies with ties to Iran.

"At the moment there are certain difficulties," Ashok was quoted by Economic  Times as saying. "CPCL requires infusion of funds and we are looking at various options including a merger of CPCL with IOC."

The company in May planned a rights issue to raise up to 10 billion rupees ($163 million) but abandoned it after NICO said it wanted to subscribe to the shares and maintain its holding.

Sanctions have toughened monetary transactions with Iran, making it difficult for the Indian company to raise funds from the market or allow parent IOC to infuse funds.

CPCL, whose two refineries can process 230,000 barrels per day of oil and account for about 5.4 percent of India's total capacity, could not pay dividends to NICO in 2010/11 and 2011/12 due to the sanctions, it said in its annual report.

The refiner stopped processing Iranian oil in 2012 after losing insurance for those supplies, while cover for crude imports from other countries was cut due to its ties with the Iranian firm.