Indian OMCs set for 50% jump in FY26 profitability as marketing margins soar

NEW DELHI: Indian public sector oil marketing companies (OMCs) are set to post more than 50% growth in operating profits in the current financial year (FY26), reaching $18-20 per barrel, driven by strong marketing margins, according to a Crisil Ratings report released on Friday.

The report estimates that higher profits will boost cumulative cash accruals to ₹75,000-80,000 crore this fiscal, up from ₹55,000 crore in FY25. This comes as Indian OMCs navigate a volatile oil market, including US sanctions on Russian suppliers Rosneft and Lukoil, effective from Friday.

“This fiscal, the improvement in marketing margins will more than offset a moderation in refining margins due to slower global fossil fuel demand amid the energy transition,” the report said.

Profit surge

OMCs earn from two main streams: refining and marketing. Refining generates gross refining margin (GRM)—the difference between the value of petroleum products and crude oil costs per barrel. Marketing generates gross marketing margin from the sale of petrol, diesel, and other petroleum products.

According to Crisil, marketing margins will be supported by stable retail fuel prices and favourable crude oil dynamics. At the time of writing, Brent crude’s December contract traded at $62.29 a barrel, down 1.77% from previous close.

Healthy marketing margins are expected to support OMCs’ capital expenditure plans and strengthen credit metrics. Over the past five financial years, geopolitical uncertainties affected oil prices, while retail fuel prices remained largely range-bound. Operating profits fell to $0.13 per barrel in FY23 when oil averaged $93 per barrel, and peaked at $20 per barrel in FY24 when prices softened to $83 per barrel.

Annual margins have ultimately stabilized around $11 per barrel, with FY25 profits at $12 per barrel, in line with the decadal industry average.

“This fiscal, crude price, though volatile, are likely to soften to $65-67 per barrel. GRM is expected to remain modest at $4-6 per barrel as moderate global demand and energy transition trends weigh on refining spreads. Amid this, unchanged retail fuel prices will boost marketing margin to $14 per barrel ( ₹8 per litre), resulting in overall margin improving more than 50% to $18-20 per barrel,” said Anuj Sethi, senior director, Crisil Ratings.

Capex boost

The projected cash accruals will support a ₹90,000 crore capex plan for brownfield expansion, primarily to meet domestic demand, with the remainder directed toward pipelines, marketing infrastructure, and green-energy initiatives.

“While the industry’s capex trajectory continues, healthy profitability will limit reliance on external debt. Hence, the ratio of debt to earnings before interest, tax, depreciation and amortisation (Ebitda) for OMCs in our portfolio is expected to improve to ~2.2 times this fiscal from 3.6 times last fiscal,” said Joanne Gonsalves, associate director at Crisil. She added that credit profiles will remain supported by the sector’s strategic importance and government ownership.

Crisil cautioned that any significant production cuts or escalation in geopolitical tensions could impact crude prices and alter these expectations.

Fitch Ratings recently said that US sanctions on Rosneft and Lukoil are unlikely to materially affect margins or credit profiles of India’s state-owned OMCs, though long-term effects will depend on the sanctions’ duration and enforcement. Indian refiners are already replacing a large share of Russian oil imports with supplies from West Asia, Africa, and the US.