Chennai:

For the officials of Lanka IOC, a wholly owned subsidiary of Indian Oil Corporation, it has been a pleasant experience in the island. Says managing director, M Nageswaran, "Till now none of the cheques issued by our dealers have bounced."

Perhaps this has prompted the company to reward the dealers by reserving some portion of its forthcoming public issue in their favour. According to Nageswaran, Lanka IOC has drawn an investment plan of $100 million.

For investors, too, Lanka IOC is offering something new - the experience of buying shares in the book—building process. According to Nageswaran, the company with an equity base of $40 million will be coming out with a premium public issue of 1.33 million shares to raise around Sri Lankan Rupees (SLR) 2.3 billion. The price band is expected to be between SLR20-30.

Last fiscal the company posted a turnover of SLR14.53 billion and expects to reach SLR33 billion in the current fiscal.

The shares will be listed in Sri Lanka''s only stock exchange, the Colombo Stock Exchange, whose members have a collective market capitalisation of SLR 75 billion.

The MoU signed in 2002 between Indian and the Sri Lankan governments charted IOC''s path to the island incorporating Lanka IOC as a wholly owned subsidiary. That year December Lanka IOC signed an agreement with the island''s Public Enterprise Reforms Commission and the Board of Investment of Sri Lanka.

Consequently, Lanka IOC acquired 100 filling stations and a one-third stake in the oil storage facilities for $75 million to become a full-fledged player in the island''s downstream petroleum segment.

Interestingly, the Sri Lankan petroleum market is much smaller than that of the Tamil Nadu''s. The island''s total demand is 3.5 million tonne per annum (tpa) while the country''s refining capacity is 2.2 million tpa. The deficit is balanced with imports. Now, Lanka IOC plans to bridge the gap by importing from India. This in turn would help IOC''s other subsidiary, Chennai Petroleum Corporation Limited to fully utilise its refining capacity.

So far, the Ceylon Petroleum Corporation with a retail network of 1070 outlets dominates the island''s petroleum market. While the government wanted the market to have three petroleum companies, Lanka IOC is the second.

In 2003, Lanka IOC took over the Ceylon Petroleum Corporation''s 100 outlets and 68 dealer- owned franchisee outlets and refurbished them at a cost of SLR651 million. According to Nageswaran, Lanka IOC is in the process of acquiring 82 more dealer-owned outlets. The company is spreading out its outlets in all areas with the slogan, "In every part and in every heart."

In a short period the company has captured a market share of about 30 per cent in the petrol, 23 per cent in the diesel and 38 per cent in the lubricant markets. "Our target is 50 per cent market share by January 2007."

The island''s lube market is truly competitive with 53 players with Caltex being the market leader. According to Nageswaran, a part of the strategy to grow its lube share is to put up a 15,000 tpa lube blending plant at Trincomalee at an outlay of $8 lakh.

Apart from that, Lanka IOC wants to make Trincomalee a bunkering hub by 2005. The company has plans to spend around $4 million getting into the bunkering business. The company has taken on 35-year lease the China Bay Tank Farm at Trincomalee consisting of 99 tanks each with a capacity of 12,250 kilo litres (KL) located in 850 acres of land. Currently, 17 of them are operational the others will also be developed according to its needs.

The tank farm renovation was carried out at an estimated outlay of around $10 million. Part of the renovation is the construction of two floating roof tanks of 6,000 kilolitres capacity, 12 new bay tank lorry filling sheds, new pump house, new fire hydrant system and safety system.

The throughput of Trincomalee has gone up from 5,000kl per month to 22,000kl, discloses Nageswaran.

The company''s future plans include getting into aviation fuel and the liquefied petroleum gas (LPG) businesses. However,unlike in India where the oil companies fill their cylinders, in Sri Lanka any company could fill any cylinder raising commercial as well as safety issues.

The company has achieved a turnover of SLR14.533 billion last fiscal. Up to June 2004 this fiscal, the turnover has been SLR5.913 billion.