India's oil marketing companies are navigating a mixed margin environment, according to ICICI Securities' latest sector update. Diesel retail margins slipped into negative territory at Rs 0.3 per litre in mid-November, marking an 18-month low, even as petrol spreads remained strong. Despite this, integrated earnings appear resilient, thanks to robust refining margins.
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ICICI Securities Report
ICICI Securities reiterated Buy ratings on Hindutan Petroleum Corporation Ltd., Bharat Petroleum Corporation Ltd., and Indian Oil Corporation Ltd., citing attractive valuations and healthy dividend yields of 3.5–4.9%.
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HPCL remains the top pick, with the brokerage noting that refining-to-marketing mix improvements and upcoming petrochemical projects will help hedge volatility over the next 18–24 months.
The report highlights that gross refining margins for Q3 FY26 are estimated at $12–13 per barrel, up $3–4 QoQ, offsetting retail weakness. LPG losses have also narrowed sharply to Rs 44.7 billion in Q2, with full-year losses projected below Rs 160 billion versus Rs 400 billion in FY25.
Additionally, Rs 300 billion in compensation for past losses will partly reflect in FY26, supporting marketing earnings.
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