According to estimates by ICICI Securities, the profit after tax (PAT) and EBITDA for the OMCs likely declined 56% and 82% YoY.AI Quick ReadThe oil marketing companies (OMCs) are in focus lately amid the surging crude oil prices following the closure of the Strait of Hormuz amid the ongoing US-Iran war. Shares of three PSU oil refiners have plunged 18-32% in the March quarter as investors assessed the impact of higher crude oil on their earnings, especially as the government focuses on cushioning the general public.
The US-Iran war, which began in the last quarter of the March fiscal, has clouded the earnings outlook for the companies in the oil and gas sector, with downstream players like Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (HPCL) the worst hit.
The earnings of OMCs in Q4 FY26 could be weaker on the back of higher retail fuel losses and a sharp rise in LPG under-recoveries, but partially offset by strong gross refining margins (GRMs).
According to estimates by ICICI Securities, the profit after tax (PAT) and EBITDA for the OMCs likely declined 56% and 82% YoY, as retail margins shrunk in the quarter under review to ₹2.9 per litre for petrol and a loss of ₹6 for diesel due to a spike in global crude oil prices and rupee depreciation.
Also, the ~10.2% and ~12.7% sequential increase in Saudi CP prices for propane and butane amid the conflict in the region has pushed the under-recovery for LPG to ₹11,000-12,000 crore in Q4, even though the Singapore GRMs rose by $3.5/barrel.
Higher Brent crude prices, coupled with the government's mandate to prioritise LPG, petrol, and diesel supply without a corresponding increase in retail selling prices, led to margin pressure for OMCs, said Prabhudas Lilladher.
Excise duty cut of ₹10/litre on domestic sales of petrol and diesel towards the end of Mar’26 provided partial relief. However, the imposition of excise duty of ₹21.5 and 29.5 per litre on diesel and ATF exports, respectively limits OMCs’ ability to fully benefit from stronger crack spreads, it added.
Analysts are sharply divided in their estimates of BPCL's Q4 performance. While ICICI Securities sees a 64% YoY decline in profit and 51% moderation in the operating profit, Nuvama Institutional Equities expects the bottomline to grow 18.5% ₹3807.1 crore. However, it sees EBITDA falling 14.6% on a yearly basis.
"We expect BPCL's EBITDA to fall by 15% YoY as weak marketing margins due to tension in West Asia are offset by improvement in refining margins (+1x YoY) and lower under-recoveries on LPG sales due to rise in cylinder prices (+8% YoY) and lower propane prices (-17% YoY)," said the brokerage.
At the same time, Prabhudas Lilladher expects BPCL's adjusted PAT for Q4 FY26 to decline 2.5% YoY. All three brokerages see an improvement in sales of 10-40% YoY.
While for HPCL, even as brokerages estimate a sharp hit to the bottomline, ICICI Securities predicts the oil PSU company to post a loss of ₹310 crore. Nuvama, meanwhile, expects HPCL's EBITDA to fall by 43% YoY and profit by 64% YoY, impacted by similar reasons.
In the case of Indian Oil Corporation, Prabhudas Lilladher expects 19% rise in adjusted PAT in Q4 FY26 and 12.8% rise in sales. However, ICICI Securities and Nuvama see a 41-81% YoY fall in profit during the said quarter.
Commenting on stock-specific opportunities, Harshal Dasani, Business Head at INVasset PMS, said that among the three, BPCL stands out from a risk-reward perspective.
"It has relatively stronger refining margins, better operational efficiency, and a cleaner balance sheet post asset monetisation. HPCL, while offering a higher beta, tends to be more volatile due to its relatively weaker refining profile and higher sensitivity to crude swings. IOC, being the largest player, offers stability and dividend visibility but may lag in terms of sharp upside," he said.
For investors positioning ahead of Q4, BPCL appears best placed tactically, while IOC suits conservative investors seeking yield.
Prabhudas Lilladher also recently upgraded HPCL to 'buy' from 'accumulate' in its Q4 preview report, saying that HPCL’s improving operational efficiency and completion of major projects remain positive. Recent price correction also offers a better entry opportunity, it added.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Saloni Goel has over nine years of experience as a business journalist, with a strong track record of covering the financial markets. Over the course of her career, she has reported extensively on global and domestic equities, IPO market activity, commodities, and broader macroeconomic trends. Her reporting reflects a keen eye for detail, data-driven analysis, and the ability to spot emerging themes early.<br>
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