Oil Marketing Firms Expected to Post Weaker Q4FY26 Earnings Amid Higher Oil Prices and LPG Under-Recoveries

OMCs Expected to Report Weak Numbers in Q4 FY 2025-26

State-owned oil marketing companies (OMCs) are expected to report weak numbers in the last quarter of financial year 2025-26 due to strong crude oil prices, weaker currency, and higher under-recoveries on LPG sales, according to analysts.

The OMCs are likely to report weak marketing margins even as refining margins look elevated, according to a preview by Kotak Institutional Equities. The brokerage expects Bharat Petroleum Corp's EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) to decline 28 percent, sequentially, and 3.2 percent from last year.

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Earlier, in view of the West Asia conflict that has put pressure on OMCs, the government has taken several measures to cushion OMCs, including an excise duty cut of Rs 10/litre on petrol and diesel and the imposition of export tax on diesel. These measures helped to moderate under-recoveries and lower refinery transfer prices, noted Motilal Oswal.

However, despite these interventions, marketing losses remained elevated and volatile, with auto-fuel under-recoveries still in the Rs 30-50/litre range, keeping pressure on OMC profitability, according to Motilal Oswal.

Kotak highlighted that while the impact of sharply elevated crude oil prices in March will mostly be seen in Q1FY27, raw material costs will rise on higher oil prices and a weak INR for OMCs. The brokerage expects LPG under-recoveries to increase despite lower volumes with sharply higher prices.

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The brokerage assumes reported gross refining margins for HPCL at $18.5/bbl against $8.4/bbl last year and losses on domestic LPG at Rs 2,100 crore against Rs 500 crore in the previous quarter.