Marketing giants anticipate robust Q1 results due to enhanced marketing margins
India's state-owned oil marketing companies (OMCs) are poised for a robust Q1 FY26, with the expected growth primarily attributed to a significant increase in petrol and diesel marketing margins, coupled with favourable crude oil price dynamics.
Key contributing factors include a sharp rise in marketing margins, favourable crude oil price trends, and a subsequent increase in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
The marketing margins for petrol and diesel saw a substantial increase. Petrol marketing margins rose by 28% quarter-on-quarter to Rs 12.8 per litre in Q1FY26, while diesel margins jumped to Rs 9.2 per litre from Rs 5.1 per litre QoQ. This growth was driven by lower crude oil prices while retail prices remained largely frozen, allowing for expansion in marketing spreads.
Crude oil prices played a significant role in the improved performance of OMCs. Brent crude averaged around $68 per barrel in Q1FY26, which was 10% lower quarter-on-quarter. This decline helped improve OMCs’ marketing margins, despite some inventory losses at refining subsidiaries such as BPCL, HPCL, and IOCL due to inventory cycles.
The expansion of marketing margins is forecasted to translate into a spectacular 122% rise in EBITDA for OMCs in Q1FY26. This indicates a strong profitability rebound despite an expected 5% year-on-year sales volume decline due to lower oil prices.
The oil & gas sector is highlighted as the primary driver of India's overall Q1FY26 earnings growth, with OMCs fueling a massive 42% year-on-year profit growth. This underscores the leading role of OMCs’ improved margins in the sectoral and market-wide recovery.
Other developments include a decline in benchmark LPG prices, which is expected to reduce LPG under-recoveries for OMCs. Analysts also expect improvements in margins for city gas distribution companies due to lower gas costs.
Emkay Global estimates EBITDA will increase 17% QoQ for ONGC on a lower expenditure profile, and oil India's crude output is expected to grow 1% on-year. For city gas distribution companies, Mahanagar Gas Ltd's unit EBITDA is expected to recover to Rs 9.8/scm from Rs 8.3/scm QoQ.
In terms of financial projections, Q1FY26 PAT (profit after tax) for IOCL, BPCL, and HPCL is estimated at Rs 6,850 crore, Rs 6,590 crore, and Rs 4,650 crore, respectively. Emkay Global also estimates ONGC's total crude output to decline 0.7% on-year and OIL's RPAT (Refinery Profit After Tax) at Rs 1,230 crore during Q1FY26.
In summary, the expected robust Q1 for Indian state-owned OMCs in FY26 is largely due to improved petrol and diesel marketing margins benefiting from lower crude prices amid stable retail pricing, resulting in a strong surge in EBITDA and significant year-on-year profit growth in the oil & gas sector.
[1] Source: Emkay Global Financial Services Limited [2] Source: ICRA Limited
- The growth in India's state-owned oil marketing companies (OMCs) for Q1 FY26 is largely linked to the finance industry, as a robust expansion in petrol and diesel marketing margins, favorable crude oil price trends, and lower crude oil prices have contributed to a significant increase in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).
- The energy sector has been a key player in India's overall Q1 FY26 earnings growth, with OMCs driving a substantial 42% year-on-year profit growth, thanks to improved marketing margins that have supported sectoral and market-wide recovery.
- Defi in the oil & gas industry has been notably influenced by the DEFI (Distribution, Finance, and Energy) sector, as the decline in benchmark LPG prices and forecasted improvements in margins for city gas distribution companies are expected to impact their profitability.
- The business outlook for Q1 FY26 for Indian state-owned OMCs, such as IOCL, BPCL, and HPCL, is promising, with estimations of a QoQ increase in EBITDA and expectations of profit after tax (PAT) of Rs 6,850 crore, Rs 6,590 crore, and Rs 4,650 crore, respectively.
