Refining Margins Deliver Strong Q3 Performance
Indian Oil Corporation (IOCL) has posted a significant consolidated net profit of around ₹13,502 crore for the third quarter of fiscal year 2026, marking a substantial multi-fold increase from the previous periods. This impressive financial outcome was predominantly driven by a strong performance in its refining and marketing segments, bolstered by improved margins. On a sequential basis, net profit saw a healthy 65 percent rise. The company's total consolidated income for the quarter stood at approximately ₹2.37 lakh crore, up from ₹2.07 lakh crore in the preceding quarter and ₹2.21 lakh crore in the same quarter of FY25.The core driver for this profit escalation was the notable improvement in Gross Refining Margins (GRM). For the first nine months of FY26, IOCL reported a GRM of $8.41 per barrel, a significant leap from $3.69 per barrel in the comparable period of FY25. The normalized GRM was even stronger at $9.86 per barrel, compared to $4.22 per barrel a year prior. This enhancement in refining profitability is attributed to more favorable crude oil acquisition costs. Operationally, IOCL also showcased strength with its refinery throughput reaching 55.719 million tonnes in 9M FY26, achieving 105 percent capacity utilization, an improvement of 5 percent year-on-year. The company also recorded its highest-ever nine-month sales volumes at 77.774 million tonnes.
Petrochemical Segment and LPG Buffer Pose Challenges
Despite the overall positive financial results, IOCL's petrochemicals business reported widening losses. The segment incurred a pre-tax loss of ₹361.51 crore in Q3 FY26, a deterioration from a gain of ₹168.42 crore in Q2 FY26 and a loss of ₹154.86 crore in Q3 FY25. This indicates ongoing pressures within the petrochemical market impacting the company's diversified revenue streams.Furthermore, IOCL is managing a cumulative net negative buffer for its LPG business, which stood at ₹24,318.60 crore as of December 31, 2025. The government has allocated ₹14,486 crore for LPG subsidies, to be disbursed in monthly installments. IOCL recognized ₹2,414.34 crore from these installments for November and December 2025 as revenue, thereby reducing the buffer. This government support remains crucial for mitigating losses in the subsidized LPG segment.
Competitive Positioning and Analyst Outlook
In the competitive Indian oil and gas sector, IOCL's P/E ratio hovers around 9.02-10.15, positioning it attractively against peers like Hindustan Petroleum (HPCL) with a P/E of approximately 6.26-6.34 and Bharat Petroleum (BPCL) at around 6.4-8.8. Oil and Natural Gas Corporation (ONGC) has a comparable P/E of around 9.2. IOCL's GRM performance, with an average of $8.41/barrel for 9M FY26, contrasts with HPCL's $8.83/BL and BPCL's $10.66/BL for similar periods, suggesting strong operational efficiency across the sector.The stock has shown recent positive momentum, with a 4.58% increase over the past 15 trading days and a 22.0% rise in 2025. Analysts maintain a generally positive outlook, with a consensus rating of "Buy" from 31 analysts, although the average 12-month price target of around ₹171.94 to ₹174.45 suggests limited immediate upside from its current trading range of approximately ₹164-₹175. However, some analysts have recently raised price targets for IOCL, indicating confidence in its ongoing performance, while one notable downgrade to 'Reduce' also exists. The broader Indian energy sector is poised for growth, with projected electricity demand increases and a shift towards renewables, though energy intensity is also expected to rise.