Q3 EBITDA at Rs 36 bn and PAT at Rs 7.2 bn came in much higher than Street expectations of net loss at both Ebitda and PAT levels, helped by FX gains and lower interest (-29% q-o-q\/+29% y-o-y). However, Ebitda is down 47% q-o-q\/73% y-o-y and PAT down 78% q-o-q\/91% y-o-y owing to steep inventory losses of `107.5 bn following 10% reduction in average crude price and 3% INR depreciation over the quarter. OMCs have been increasing their marketing margins since late November, 2018 (auto-fuel margins now at >Rs 7\/lt) after crude price spiraled down. We expect these to normalise towards levels of Rs 2.0-2.5\/lt on annual basis. GRMs have been trending weak currently on low light-distillate cracks but we expect them to recover Q2CY19 onwards as refiners gear up for IMO 2020 regulation. Change in estimates We cut our FY19 estimates by 16% to factor in weak performance in Q3. FY20\/21e estimates cut by 5\/3% as we decrease GRM assumption, somewhat offset by higher refining throughput and marketing margins. Our TP rises to Rs 140 (Rs 130 earlier) as we rollover valuation to FY21e. Upgrade to Hold on perceived reduction in risks, low valuations while taking comfort from >5% dividend yield and\u00a0 13-15% RoE over FY19-21e. Operational highlights from quarter Reported GRM of $1.15\/bl was down $5.6 per bl q-o-q\/y-o-y due to 10% q-o-q reduction in crude price (+10% y-o-y) and INR depreciation of 3% q-o-q\/11% y-o-y. Inventory loss of Rs 80.8 bn implies ~30 crude inventory days during the quarter. Core GRM (net of inventory loss and price lag \u2013 IOCL\u2019s definition) of $5.12\/bl underperformed $0.76 per bl q-o-q\/y-o-y even as high-sulphur utilisation improved to 56.8% (+220 bps q-o-q\/+90 bps y-o-y). Core GRM (net of inventory loss) \u2013 comparable to Singapore Complex GRM, increased by $5.7 per bl q-o-q\/y-o-y when benchmark Singapore Complex GRM fell $1.8 per bl q-o-q Petroleum products sale rose 6% q-o-q\/flat y-o-y\u2014 Increase in diesel sales (+13% q-o-q\/+1% y-o-y) and petrol sales (+1% q-o-q\/+11% y-o-y) was somewhat offset by steep decline in exports (-30% q-o-q\/-32% y-o-y). However, diesel and petrol sales growth lagged the industry growth which resulted in market share loss of 27 bps and 36 bps q-o-q, respectively (-44 bps and +115 bps y-o-y). Core marketing margin fell 3% q-o-q\/+38% y-o-y to Rs 5,010\/te as OMCs were asked to absorb Rs 1\/lt of auto fuel margins starting from early October 2018 by the government, which was somewhat recovered by the companies after global crude and auto fuel prices crashed from mid-November, 2018.