Oil marketing companies like IOC, BPCL, and HPCL are facing a difficult April-June quarter due to rising crude prices and falling marketing margins. Brokerage forecasts suggest a significant shift to net losses compared to last year’s profits, while upstream companies like ONGC and Oil India may see better earnings growth.
Major Indian oil marketing companies, including Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL), are expected to report a challenging financial performance for the quarter ending June 2026. According to projections by PL Capital, these companies are facing a difficult period marked by a sharp decline in profitability. The forecast points toward a potential combined net loss for these entities, contrasting heavily with the profits generated in the same period a year ago.
Factors Impacting Marketing Margins
The primary pressure on these oil marketing firms stems from elevated global crude oil prices, which have not been fully offset at the retail pump level. Marketing margins, which represent the profit earned per litre of fuel sold, have faced significant stress. When crude oil prices rise sharply, oil marketing companies often find it difficult to pass the entire cost burden to consumers, leading to smaller margins or even losses on fuel sales. Additionally, the presence of high under-recoveries—specifically in the LPG segment—further complicates the financial picture for these companies.
Refining Margins and Operational Hurdles
While global refining conditions have shown periods of strength, Indian refiners have struggled to translate these into strong bottom-line results. Factors such as the Special Additional Excise Duty (SAED) and government-influenced refinery transfer prices have limited the benefit that these companies can derive from global refining cracks. Furthermore, potential inventory losses due to fluctuations in oil prices have acted as an additional burden on their earnings capability.
Divergent Trends in the Upstream Sector
In contrast to the marketing segment, upstream companies such as Oil and Natural Gas Corporation (ONGC) and Oil India are expected to show more resilient performance. These companies benefit from higher realisations on the crude oil they produce. While the restoration of government royalty rates is expected to temper the final profit figures for these upstream players, their revenue and EBITDA are still projected to show year-on-year growth, highlighting the different impact of crude price movements on production versus marketing businesses.
Challenges in the City Gas Segment
City gas distributors like Indraprastha Gas and Mahanagar Gas are also navigating a complex environment. Increased input costs for natural gas have put downward pressure on profit margins. Although these companies have implemented price hikes for their CNG and PNG offerings, these increases have not fully covered the rise in input expenses. Investors may continue to monitor volume growth in the CNG and PNG segments as a potential long-term recovery driver for these distributors, despite the current near-term profitability concerns.