Chennai Petroleum Corporation Ltd. (CPCL) said it would have to take a significant inventory write-down of ₹1,456 crore due to COVID-19-related events.
In a regulatory filing, the company said that international prices of crude and products crashed on account of COVID-9 and the consequent lockdown from March 25 in India impacted its business.
Consequently, lower demand for crude oil and petroleum products impacted the prices and refining margins of the company. Due to this, the finished goods, intermediates and raw material inventory had been valued at net realisable value/replacement costs. This resulted in a significant inventory write down of ₹1,456 crore, the company said.
CPCL, which is currently operating at 60% capacity, expects the demand for products to improve over the next few weeks as more and more sectors open up.
The lower demand and resultant inventory build-up has led to an increase in short-term borrowings, which is expected to get normalised based on turnaround in demand situation and stabilisation of international prices of crude and products, CPCL said.
After assessing the potential impact of COVID-19 based on the current circumstances, CPCL does not expect any significant impact on the continuity of operations of the business on a long-term basis, on useful life of the assets and on financial position, though there may be lower revenue and refinery throughput in the near term.