Higher refining margins translated into higher operating or Ebitda (earnings before interest, taxes, depreciation and amortisation) margins that more than offset losses on retail sales of transport and cooking fuel, showed a Business Standard analysis.
The companies also benefited from a cut in excise duty on petrol and diesel in March, the benefit of which they did not pass on to consumers. The duty cut led to a sharp year-on-year decline in their indirect tax outgo without any change in retail fuel prices, expanding OMCs’ marketing margins.
Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) reported combined net profit (adjusted for exceptional gains and losses) of ₹29,896.1 crore in the September quarter of FY27, up 66.2 per cent year-on-year from ₹17,990.4 crore in the year-ago period and the highest in the last 13-quarters.
These companies’ gross sales revenue (including excise duty) —that reflects the retail prices of their key products such as diesel, petrol, liquefied petroleum gas (LPG) and aviation turbine fuel (ATF) — was up 28.9 per cent year-on-year to ₹5.64 trillion in Q2FY27, up from around ₹4.38 trillion in the comparable year-ago period. But quarterly gross sales were down 3.7 per cent sequentially from a record high of ₹5.86 trillion in the June quarter.
OMCs’ combined net sales (gross sales net of excise duty) was at around ₹5.37 trillion in the September quarter of FY27 — up 39.9 per cent from around ₹3.84 trillion a year ago, but down 3.7 per cent from record quarterly high of ₹5.58 trillion in the Q1FY27.
Before the duty cut in March, OMCs had on average spent around ₹52,350 crore on excise duty every quarter, between September 2021 and December 2025.
Their raw material costs were up 33.3 per cent in a year, while the purchase of refined product from independent refiners for retail sales was up 39.2 per cent — both growing slower than the rise in their net sales.
As a result, OMCs’ combined operating profit was up 50.8 per cent year-on-year to ₹54,750 crore in the September 2026 quarter, from ₹36,304 crore a year ago and an operating loss of ₹10,789 crore in the June 2026 quarter.
The companies’ Ebitda margin improved to 10.1 per cent of net sales in Q2FY27, from 9.4 per cent a year ago and -1.9 per cent in Q1FY27.
For comparison, OMCs’ operating margin had been 6.5 per cent on average in the previous 20 quarters.
Their raw material expenses (including purchase of traded goods) improved to 84 per cent of net sales in Q2FY27, from 97.6 per cent in the June quarter this year and 83.3 per cent in the September quarter last year.
In the September quarter under review, OMCs reported a consolidated net profit of over ₹30,000 crore on account of refining gains.
Similarly, private player Reliance Industries Ltd’s (RIL’s) oil-to-chemicals (O2C) segment’s earnings before interest and taxes (Ebit) stood at a record high of ₹22,347 crore in Q2FY27, against ₹12,560 crore a year ago and ₹14,170 crore Q1FY27.
The O2C segment revenue was up 44.2 per cent year-on-year to around ₹2.32 trillion in Q2FY27, from ₹1.61 trillion a year ago.
RIL Chairman and Managing Director Mukesh Ambani last month attributed the strong O2C business performance to tight fuel markets, improved downstream petrochemical deltas, and firm domestic demand.
The company’s ability to optimise feedstock sourcing and product placement along with operations across the value chain enabled it to improve margin capture, Ambani said.
Crude oil prices in the September 2026 quarter increased 40 per cent year-on-year due to the West Asia crisis, whereas prices of transportation fuel in the international market were up 50-78 per cent. Prices of most downstream chemical products were up 25-35 per cent annually, on strong feedstock prices.
After IOCL results, Harshraj Aggarwal, analyst at Yes Securities, said that earnings outperformance was driven by strong refining margins and a sharp recovery in marketing profitability, supported by better integrated margins and recognition of ₹3,620 crore in LPG subsidy compensation from the government. “The overall performance reflects a strong operational recovery, although elevated LPG under-recoveries and forex losses continue to weigh on earnings,” said Aggarwal.
The benefit of higher exports, however, is not uniform across the sector as private refiners have greater flexibility to divert supplies to export markets while state-run oil marketing companies (OMCs) primarily cater to domestic consumers.
The government has also imposed special additional excise duty (SAED) on petrol, diesel, and ATF as a policy tool to balance overseas sales with domestic availability amid volatility in global oil markets.
Commenting on RIL’s performance, research firm Nomura said the company’s Ebitda at ₹25,200 crore was against the estimate of ₹20,300 crore, in its strongest-ever quarter. “With cracks broadly stable quarter on quarter at multi-decade highs, the sequential jump came from a lower crude basket cost, better margin capture and higher throughput,” it said.
