Who got a better deal IOC shareholder or an IBP shareholder?
As is evident from the profile, though the administered pricing mechanism (APM) was dismantled in 2000, the fact remains is that prices at the consumer end are not market determined. At the same time, prices are completely de-regulated at the refinery gate level. Owing to the government interference, despite the sharp rise in crude prices over the last one and half years, retailing prices was not increased. This meant that IBP was buying petroleum products to be sold through its retail distribution network at international rates and selling the same products at the ‘regulated’ price. This is evident from the fact that IBP’s operating margin in 1HFY05 was a negative (1.2%) and as compared to a net profit of Rs 819 m in 1HFY04, the company incurred a loss of Rs 695 m in 1HFY05. It was very clear that unless the petroleum product pricing is de-regulated, IBP stands to lose and therefore, the merger with IOC was important from a long-term standpoint. Investors have to consider two key aspe
