NewKerala.com

Key Points

Indian oil marketing companies are poised for strong financial performance in FY26. Lower global oil prices are driving improved marketing margins and reducing LPG-related losses. The companies have already booked inventory losses in Q1, reducing future volatility risks. HSBC Research has increased earnings forecasts based on these favorable market conditions.

Key Points: Indian Oil Companies Strong FY26 Earnings on Lower Prices Reduced LPG Losses

  • Lower oil prices support strong auto fuel marketing margins of Rs 5-9 per litre
  • Global LPG prices decreased by 30-40% reducing cylinder losses significantly
  • Reduced working capital requirements and lower borrowing needs from stable oil prices
  • Russian crude discount narrowed to $1.5-2 per barrel improving refining economics
2 min read

Indian oil companies to clock strong earnings in FY26 on lower prices, reduced LPG losses

Indian OMCs set for strong FY26 earnings with lower oil prices, reduced LPG losses, and improved marketing margins according to HSBC Global Research report.

"OMCs now have a large margin of safety owing to low oil price and a large capex plan - HSBC Global Investment Research"

New Delhi, Aug 27

The Indian oil marketing companies (OMCs) are set to clock strong earnings in current fiscal (FY26) due to lower oil prices and reduced LPG losses, according to a new report.

HSBC Global Investment Research believes that OMCs now have a large margin of safety owing to low oil price and a large capex plan which “gives us confidence that a normative level of earnings (assumed) will still be maintained”.

Lower oil price is supportive of strong auto fuel marketing margins (currently Rs 5-9 per litre) and this augurs well for the FY26 earnings.

In addition, global LPG prices have also decreased, leading to 30-40 per cent reduction in LPG losses per cylinder currently versus Q1 FY26.

“This will result in a lower under-recovery for FY26. While more details are awaited on the pay-out mechanism of Rs 300 billion provisioned by the government towards compensating OMCs for LPG losses (yet to account), these trends present upside risks to earnings forecasts,” the report mentioned.

Gross refining margins (GRMs) continue to trend lower than long-term averages, but product cracks remain healthy and higher than FY25. This indicates refining profitability could be better than last year if Russian crude mix does not alter too much.

With inventory losses already booked in Q1 FY26, and Brent prices $65-67 per barrel (largely in line with HSBC forecasts for FY26), with stable oil prices, shocks from inventory losses are less likely. Lower oil prices will also reduce the working capital requirement, thus reducing the borrowing needs, the report mentioned.

On the quarterly basis (Q1), PAT increased 30 per cent/90 per cent for HPCL/BPCL while was lower by 20 per cent for IOCL due to inventory impact.

Russian crude mix varies for the three OMCs, but all of them indicated any changes to the mix will solely be driven by economic considerations, said the report.

Russian crude discount has narrowed to $1.5-2 per barrel and LPG losses decreased to Rs 80 billion in Q1 FY26 (compared to Rs 120 billion in Q4 FY25) and marketing margins improved.

“We increase marketing margin estimates given low crude oil prices leading to higher earnings,” the report said.

—IANS

- IANS

Share this article:

Reader Comments

P
Priya S
Finally some relief on LPG cylinder prices! The ₹300 billion provision for compensating losses shows government's commitment to keeping cooking gas affordable for households 🍳
A
Aman W
While profits are good for companies, I hope they invest in better infrastructure and cleaner fuels. We need sustainable energy solutions for the long term.
S
Sarah B
The Russian crude strategy seems to be paying off despite narrowing discounts. Smart economic diplomacy by India to secure energy needs at reasonable prices 👍
V
Vikram M
BPCL and HPCL showing 90% and 30% PAT growth is impressive! IOCL's 20% decline due to inventory impact shows how volatile this sector can be. Investors should note this volatility.
N
Nisha Z
Hope the reduced working capital requirements and lower borrowing needs translate to better services at petrol pumps. Some stations still need maintenance and better facilities.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50