Indian Oil Marketing Companies (OMCs) are projected to experience a significant surge in profitability during the current financial year (FY26), with operating profits expected to jump by more than 50% to reach $18-20 per barrel. This substantial growth is primarily attributed to stronger marketing margins, driven by stable retail fuel prices and favorable crude oil dynamics.
A Crisil Ratings report released on Friday, November 21, 2025, highlights that this surge in profits will significantly boost the cumulative cash accruals for OMCs to ₹75,000-80,000 crore, a notable increase from ₹55,000 crore in FY25. These healthy accruals are expected to support the ambitious capital expenditure (capex) plans of OMCs, predominantly focused on brownfield capacity expansion. Around 80% of the budgeted capex is aimed towards addressing domestic demand for petroleum and petrochemical products, with the remaining amount allocated for product pipelines, marketing infrastructure, and green-energy initiatives.
OMCs generate revenue from two primary streams: refining and marketing. Refining margins, also known as gross refining margins (GRM), represent the difference between the value of petroleum products and the cost of crude oil per barrel. Marketing margins, on the other hand, are generated from the sale of petrol, diesel, and other petroleum products. While refining margins are expected to moderate due to slower global fossil fuel demand amid the energy transition, the improvement in marketing margins is expected to offset this moderation. Crisil Ratings anticipates that stable retail fuel prices, coupled with favorable crude oil dynamics, will bolster marketing margins.
Analysts project a softening of crude prices to $65-67 per barrel for this fiscal year, with gross refining margins (GRM) estimated at $4-6 per barrel. Anuj Sethi, Senior Director at Crisil Ratings, noted that unchanged retail fuel prices will likely boost marketing margins to $14 per barrel (Rs 8 per litre), resulting in an overall margin improvement of over 50% to $18-20 per barrel. The ratio of debt to earnings before interest, tax, depreciation, and amortisation (EBITDA) for OMCs is also expected to improve to 2.2 times this fiscal year, from 3.6 times in the last fiscal.
Fitch Ratings stated that US sanctions on Russian suppliers Rosneft and Lukoil, along with the EU's ban on refined products made from Russian crude, are unlikely to materially impact the margins or credit profiles of Indian OMCs. However, the actual impact will depend on the duration and enforcement of these sanctions. While Indian refiners are expected to comply with the sanctions, some may continue to process Russian crude from unsanctioned sources.
The Indian government has also approved a significant support package of INR300 billion for Indian Oil Corporation Ltd (IOC), Hindustan Petroleum Corporation Limited (HPCL), and Bharat Petroleum Corporation Limited (BPCL) during the second quarter of FY26. This will help cover the OMCs' under-recoveries on selling domestic liquid petroleum gas (LPG) at subsidised prices and should add to the companies' cash buffers. Fitch expects GRMs to remain around mid-cycle levels of USD 6 per barrel in FY27, supported by steady domestic fuel demand and high refinery utilization rates.
