In the event the government does finally sell off part of Indian Oil Corporation's [ Get Quote ] retail business, the PSU is likely to be very badly affected.

Also Read Govt to mull sale of IOC retail operations The Divestment Development: Complete Coverage

Today, IOC controls around 52 per cent of the country's retail outlets along with its newly-acquired IBP (6,500 for IOC and 1,500 for IBP).

But what is more important, the retail business contributes around 40-45 per cent of the profits of marketing companies like IOC.

So, depending on how many of IOC's retail outlets the government decides to sell — if it wants to match what HPCL [ Get Quote ] has, it will have to sell off half the IOC/IBP outlets - IOC will lose that much of its profits.

The refinery and pipeline business, which is what IOC will effectively be left with, typically contribute 30-35 per cent of its profits.

More important, with its 8,000 retail outlets (or half of them) sold, IOC will have a serious problem in selling the produce of the 8 refineries it owns - today, a little over 42 per cent of the country's refining capacity is owned by IOC.