State-owned oil marketing companies (OMCs) are likely to sustain their profitability momentum in the remaining quarters of the fiscal 2025-26 on the back of robust refining and firm marketing margins, as per analysts. This growth, experts believe, will also be aided by continued LPG under-recovery compensation from the government.
The official notification of LPG payout of Rs 14,500 crore for Indian Oil, Rs 7,650 for Bharat Petroleum, and Rs 660 crore for Hindustan Petroleum along with steadily reducing LPG losses (Rs 50 per cylinder rise in prices and lower international LPG prices helped pare losses to around Rs 100 per cylinder, from Rs 150 per cylinder in Q1) may further boost H2FY26 prospects for these companies, as per ICICI Securities.
The brokerage added that with formal notification for LPG compensation in 12 installments likely to start from November 2025, profitability may be further protected from LPG-related volatility.
Motilal Oswal also raised its marketing margin assumptions for petrol and diesel for BPCL and HPCL slightly to Rs 3.5/litre (from Rs 3.3/litre earlier) for H2FY26-FY28. The revisions collectively drive a 20% upward revision for BPCL and a 23/27% upward revision for HPCL in FY26/27 EBITDA estimates.
However, the back and forth on the part of the US with respect to Russian crude exports has created material uncertainties on the sourcing mix for the OMCs during H2FY26.
With the latest round of sanctions on Rosneft and Lukoil (3.1 mbd exports out of estimated 3.8–3.9 mbd total Russia exports), the 20–25% of sourcing Indian OMCs are getting from Russia may have to be replaced with alternate sources, as per ICICI Securities.
With discounts on Russian barrels narrowing to $2.5/bbl at current levels, the impact on crude cost is likely to be minimal on OMCs earnings.
“However, we note product spreads, as of now, for diesel/gasoline/ATF are at very strong levels (USD 20–22/bbl levels for diesel/ATF, USD 15–16/bbl for gasoline); therefore, computed gross refining margins, even after using benchmark Dubai crudes, are trending at >USD 9–10/bbl, well above the street estimates. This can help offset the Russia impact over H2FY26,” ICICI Securities said.
HPCL’s average EBITDA run-rate for the last four quarters stood at Rs 6,600 crore against last 14 quarters’ average of Rs 3,000 crore, as per ICICI Securities estimates. “We see similar trends for H2FY26, helped by higher GRMs, lower LPG losses and steady retail margin,” it said, estimating the company’s EBITDA upgrade for FY26/27/28E at 35%, 14%, and 7% respectively.
A favourable margin environment in recent months coupled with lower crude prices ranging at $65 per barrel, analysts expect both gross refining margins and marketing margins to remain healthy for OMCs.
Furthermore, assuming crude prices stays in a narrow band of $65–70/bbl, LPG losses incurred by the OMCs are expected to materially reduce for FY26, analysts said.
