Indian Oil Corporation - Q1 FY27 Earnings Call Summary Saturday, August 1, 2026 12:00 PM IST
Event Participants
Executives
3 Anuj Jain, Nitin Kumar, Pramod Jain
Analysts
11 Bineet Banka, Keshav Soni, Kishan Mundra, Nitin Tiwari, Probal Sen, Sabri Hazarika, Sanjay Mookim, Saarthak Tita, Saurabh Handa, Varatharajan Sivasankaran, Vivekanand
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹275,972 crores | Up ~18.5% QoQ (₹232,855 cr) and ~26.3% YoY (₹218,608 cr), driven by higher product prices amid crude spike |
| Net Profit / (Loss) | (₹2,661 crores) | vs PAT of ₹11,378 cr in Q4 FY26 and ₹5,689 cr in Q1 FY26; loss driven by marketing margin pressure from geopolitical volatility and crude spike |
| Indian Basket Crude Price | $100.74/bbl | Up ~21% QoQ from $83.01/bbl, due to U.S.-Iran conflict and supply disruptions |
| Gross Refining Margin (GRM) | $15.59/bbl | Net of SAED; gross GRM pre-SAED would be ~$36/bbl |
| Crude Throughput | 19.2 MMT (109.4% CU) | Down from 19.7 MMT/113.9% QoQ; up from 18.7 MMT/106.7% YoY |
| Pipeline Throughput | 28.5 MMT (79.9% CU) | Record quarterly throughput vs 27.7 MMT/78.3% QoQ and 26.3 MMT/73.5% YoY |
| Total Sales Volume | 26.211 MMT | vs 27.343 MMT QoQ and 26.328 MMT YoY; MS +7% and HSD +5% sequential consumption growth |
| Petrochemical Sales | 0.768 MMT | vs 0.901 MMT in preceding quarter |
| Gas Sales | 1,873 TMT (incl. CGD 67 TMT) | vs 1,814 TMT (incl. CGD 54 TMT) QoQ |
| Q1 Capex | ₹6,461 crores | FY27 budgeted capex of ₹32,700 crores |
| Total Borrowings | ₹141,453 crores | Up from ₹110,668 crores as of Mar 31, 2026 on higher working capital requirements |
| Debt-to-Equity | 0.71 gross / 0.51 net | Comfortable leverage despite significant quarterly borrowing increase |
| Fuel & Loss | 8.04% | Lowest ever quarterly figure post-BS6 scenario |
| Spot Crude Procurement | 84% | vs ~51% in Q1 FY26; up sharply from ~50% pre-war |
Geographic & Segment Commentary
Refineries: Crude throughput of 19.2 MMT at 109.4% capacity utilization, below Q4's 19.7 MMT/113.9% but above Q1 FY26's 18.7 MMT/106.7%. Achieved lowest ever quarterly fuel and loss of 8.04% post-BS6. Major expansions progressing: Panipat (15→25 MMTPA, ₹38,000 cr, 94% complete, Dec '26), Gujarat (13.7→18 MMTPA, ₹19,000 cr, 90% complete, Nov '26), Barauni (6→9 MMTPA, ₹18,000 cr, 92% complete, Dec '26).
Marketing: Total sales volume of 26.211 MMT vs 27.343 MMT QoQ and 26.328 MMT YoY. Commissioned 320 retail outlets, taking total to 43,138. Launched Indane XTRALITE NOW (10 kg composite LPG cylinder with express 4-hour delivery) across Pune, Gurugram, Indore, and Coimbatore, with phased national expansion planned.
Petrochemicals: Sales of 0.768 MMT vs 0.901 MMT in preceding quarter. PX-PTA project (95% complete) expected to commission within 1 month; polybutadiene rubber plant at Panipat (₹3,000 cr) due by Dec '26. Company targets petchem intensity increase from 6.5% to 15% over next 5-6 years with ~₹100,000 crores capex.
Gas: Total gas sales of 1,873 TMT including CGD sales of 67 TMT, up from 1,814 TMT (CGD 54 TMT) in preceding quarter.
Renewables (Terra Green): Received connectivity approval of 2.6 GW capacity on Central/State Transmission Utility. 100 MW wind project in Gujarat underway; 423 acres allotted by UPNEDA in Uttar Pradesh for ~100 MW solar plant. Aggressively pursuing group captive open access PPAs with C&I customers. Target of 18 GW renewable capacity in next 3-4 years.
Company-Specific & Strategic Commentary
Refining/Petchem Expansion Program: ₹90,000 crores (~$10 billion) capex across five major projects commissioning by end-2026, including Panipat, Gujarat, Barauni expansions, PX-PTA, and polybutadiene rubber plant. Expansions position IOCL for throughput of ~85 MMTPA in FY28 and ~90 MMTPA in FY29.
Crude Sourcing Diversification: Spot procurement surged to 84% of imports (vs ~51% in Q1 FY26 and ~50% pre-war). Increased sourcing from Russia (up to 50-54% of portfolio), South America, Venezuela, West Africa, and even U.S. cargos; crude landed cost premium peaked at ~$10/bbl over Brent during peak war, moderating to $2-3/bbl in July.
Petrochemical Intensity Push: Strategy to raise petchem intensity from 6.5% to 15% over 5-6 years with ~₹100,000 crores capex; projects in various approval stages, open to naphtha and gas/ethane feedstock; incremental projects expected to commission by '29-'30.
SPRINT Program: SPRINT 1 delivered ~₹2,000 crores savings in FY26; SPRINT 2 launched targeting additional ₹2,000-2,500 crores in savings across cost, efficiency, market share, logistics, and opex.
Shipping JV: Non-binding MoU signed (Sep 19) under MoPNG/Ministry of Shipping aegis for tonnage security; IOCL exploring procurement of 4 MR vessels initially via JV with other oil & gas partners; tenders already issued.
Ethanol Blending: Achieved 20% blending target per Government of India policy, at par with other OMCs; blending decisions made collectively across all three OMCs.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Refinery Throughput | ~77 MMTPA FY27, ~85 MMTPA FY28, ~90 MMTPA FY29 | Phase-wise commissioning of expansions (Panipat/Gujarat/Barauni by Nov-Dec '26) drives capacity ramp; PX-PTA commissioning within ~1 month |
| Capex | ₹30,000-40,000 crores annually for next 2-3 years | Continuation of current run-rate; petchem (intensity to 15% by ~2030) and renewables (18 GW in 3-4 years) absorb largest share; projects pass hurdle-rate scrutiny |
| LPG Under-Recovery | ~₹250/cylinder average in Q2 FY27 | Down from ₹665/cylinder in June and |
| Project Completion | Panipat, Gujarat, Barauni expansions by Nov-Dec '26; PX-PTA in ~1 month; PBR plant by Dec '26 | Projects 90-95% complete; phase-wise commissioning of utilities/offsite facilities underway; IOCL expects improved distillate yields and margins from new units |
| Petchem Intensity | 6.5% → 15% over next 5-6 years | ~₹100,000 crores capex; projects targeting commission by '29-'30; open to naphtha and gas-based feedstock |
| Renewables | 18 GW within next 3-4 years | Terra Green managing scale-up; 4-5 GW already at various stages; 2.6 GW connectivity approved |
Risks & Constraints
| Risk | Context |
|---|---|
| Geopolitical Volatility / Supply Disruption | Middle East escalations (Strait of Hormuz, Red Sea) and ongoing U.S.-Iran conflict keep crude prices and freight/insurance costs elevated; Indian Basket crude up 21% QoQ to $100.74/bbl; management flags day-to-day pricing dynamics and margin unpredictability |
| Marketing Margin Pressure on Retail Fuels | Retail fuel margins squeezed by crude spike, resulting in net loss of ₹2,661 crores in Q1; pricing remains dynamic; management engaged with authorities, confident of LPG compensation based on past practice, but timing and quantum uncertain |
| LPG Under-Recovery Uncertainty | Under-recovery expected ~₹250/cylinder in Q2 (down from ₹665 in June) but dependent on Saudi CP trajectory and geopolitical stability; compensation from government not yet assured for this cycle |
| Potential U.S. Sanctions on Russian/Iranian Crude | U.S. Senate passed sanctions bill on Russian/Iranian hydrocarbons; not yet law (requires House + President); could restrict access to Russian crude, which rose to 50-54% of sourcing portfolio; management tracking developments, says mitigation possible |
| Rupee Depreciation | INR hit ₹96.83/USD low in mid-May before recovering to ~94.67; currently ₹95-96/USD and under pressure, raising import costs; RBI repo rate held at 5.25% with neutral stance |
| Borrowing Costs & Leverage | Debt increased ₹31,000 crores in single quarter to ₹141,453 crores; interest costs rising in higher-yield environment (US Fed 3.5-3.75%, RBI 5.25%); gross D/E of 0.71 remains comfortable but further borrowing at elevated rates could pressure returns |
| Refinery Expansion Execution Risk | Simultaneous ramp-up of multiple large projects (~₹90,000 crores capex); any slippage from Nov-Dec '26 completion timelines would delay throughput guidance of ~85 MMTPA in FY28 |
Q&A Highlights
Capital Allocation & Capex Outlook
- Question: How will capital allocation look over next 2-3 years, especially with downstream investments completing in CY26? (Probal Sen, ICICI Securities)
- Answer: Capex will remain in ₹30,000-40,000 crores range annually. Petchem intensity target of 15% (from 6.5%) requires ~₹100,000 crores over 5-6 years. Renewables (18 GW target), biofuels, and shipping (4 MR vessels) will absorb capital. All investments pass hurdle-rate scrutiny. (Anuj Jain)
GRM & SAED Impact
- Question: What would normalized GRM be without SAED export tax? (Probal Sen, ICICI Securities)
- Answer: Reported GRM of $15.59/bbl; adding SAED back yields ~$36/bbl gross. (Anuj Jain)
LPG Under-Recovery Trajectory
- Question: What is LPG loss per cylinder currently and expected path? (Probal Sen, ICICI Securities)
- Answer: June ~₹665/cylinder, July ~₹475/cylinder; August improved as Saudi CP fell from ₹796 to ₹592, but has since risen to ₹632. Q2 average expected ~₹250/cylinder assuming Saudi CP stability. Geopolitics remains swing factor. Confident of government compensation based on past practice, though timing and quantum uncertain. (Anuj Jain)
Inventory Impacts
- Question: Was there inventory impact on GRMs and marketing in Q1? (Sabri Hazarika, Emkay Global)
- Answer: Crude inventory loss of $3-4/bbl (crude marked at ~$83/bbl on June 30 vs ~$87 on March 31). Finished goods inventory gain of ~₹15,000 crores helped mitigate quarterly losses. (Anuj Jain)
Refining Expansion Timelines & Throughput
- Question: When will expansions complete and what throughput trajectory?" (Kishan Mundra, DAM Capital / Sabri Hazarika)
- Answer: Panipat (15→25 MMTPA, ₹38,000 cr, 94% complete), Gujarat (13.7→18 MMTPA, ₹19,000 cr, 90% complete), Barauni (6→9 MMTPA, ₹18,000 cr, 92% complete) all due by Nov-Dec '26. PX-PTA (95% complete) commissioning within a month. Throughput guidance: ~77 MMTPA FY27, ~85 FY28, ~90 FY29. (Anuj Jain)
Crude Sourcing & Landed Cost Premium
- Question: What is crude landed cost buildup vs Brent, and any supply chain improvements? (Vivekanand, Ambit Capital)
- Answer: Pre-war procurement at Brent minus $1-2; peak war cost ~$10/bbl over Brent (all-inclusive of shipping/insurance); July down to $2-3/bbl over, now rising again. Spot procurement jumped to 84% (vs ~50% pre-war). Russian crude up to 50-54% of portfolio; also sourcing from Venezuela, South America, West Africa, USA. Shipping JV under MoPNG/MoS MoU exploring 4 MR vessels; tenders out. (Anuj Jain)
Borrowing Levels & Oil Secretary Comment
- Question: How to reconcile Oil Secretary's June comment on borrowing limits vs stable balance sheet? (Sanjay Mookim, JP Morgan)
- Answer: Absolute borrowings jumped ₹31,000 crores in one quarter to ₹141,453 crores, but gross D/E of 0.71 and net D/E of 0.51 reflect strong FY26 balance sheet. Funds are available; competitive rates are being accessed, though interest costs have risen from pre-war levels. (Anuj Jain)
Petrochemical Strategy & Feedstock Flexibility
- Question: What hurdle rate for petchem investments? Open to ethane-based crackers? (Bineet Banka, Nomura)
- Answer: All investments pass hurdle-rate requirements under capital allocation policy. Petchem is cyclical but domestic demand is huge and imports are high; scale and integration provide competitive edge. Open to naphtha, gas (ethane), or any feedstock type. (Anuj Jain)
Ethanol Blending Policy
- Question: Is there flexibility to reduce blending if crude falls below $65? (Bineet Banka, Nomura / Keshav Soni, Kotak Bank)
- Answer: Blending decisions are made collectively across all three OMCs per government targets, not company-specific. 20% target achieved; committed to meeting any new government targets. (Anuj Jain)
ATF Pricing & Scheme
- Question: Which airlines availed the fixed-rate ATF scheme? What is current ATF price? (Saarthak Tita, DSP Asset Managers)
- Answer: No airlines availed the PSF facility as prices softened before activation. Domestic scheduled airline ATF price currently ~₹115/liter (up from ₹110 in previous cycle; was ₹115 before). International ATF priced at market rates. Domestic bulk diesel represents ~10-15% of total HSD volumes. (Anuj Jain)
SPRINT Program & U.S. Sanctions
- Question: Any update on Project SPRINT and impact of U.S. sanctions on Russian/Iranian crude? (Vivekanand, Ambit Capital)
- Answer: SPRINT 1 delivered ~₹2,000 crores savings in FY26; SPRINT 2 targeting additional ₹2,000-2,500 crores across cost, efficiency, logistics, and opex. On sanctions: U.S. Senate passed the bill but it is not yet law (requires House + President); tracking developments daily and confident of mitigation when implemented. (Anuj Jain)
Key Takeaway
Indian Oil reported a net loss of ₹2,661 crores in Q1 FY27, a sharp swing from ₹11,378 crores PAT in Q4 FY26 and ₹5,689 crores in Q1 FY26, as geopolitical turmoil drove Indian Basket crude up 21% QoQ to $100.74/bbl and squeezed retail fuel marketing margins. Revenue climbed 18.5% QoQ to ₹275,972 crores on higher product prices, and reported GRM of $15.59/bbl (pre-SAED ~$36/bbl) was aided by ~₹15,000 crores in finished-goods inventory gains offsetting $3-4/bbl crude inventory losses. Operational resilience held with refinery throughput of 19.2 MMT at 109.4% capacity utilization and record pipeline throughput of 28.5 MMT. Strategy centers on completing ₹90,000 crores of refining/petchem expansions by end-2026 (Panipat, Gujarat, Barauni, PX-PTA), lifting petchem intensity from 6.5% to 15% with ~₹100,000 crores capex over 5-6 years, scaling Terra Green renewables toward 18 GW, and diversifying crude sourcing (84% spot; Russian up to 50-54%). Management guided Q2 LPG under-recovery to moderate to ~₹250/cylinder and FY28 throughput of ~85 MMTPA, while flagging watch-points around Middle East volatility, potential U.S. sanctions on Russian crude, rupee weakness (₹95-96/USD), and elevated borrowings of ₹141,453 crores driving higher interest costs.