IOCL Q4 performance expected to be muted, LPG user recoveries

The OMCs average gross refining margin (GRM) during 9M FY25 was $3.69 per barrel compared to $13.26 in 9M FY24. 
| Photo Credit:
ANUSHREE FADNAVIS

State-run Indian Oil Corporation’s (IOCL) performance is expected to be muted during Q4 FY25 largely on account of rising LPG under recoveries and weak refining margins.

However, the country’s largest oil marketing company (OMC) is expected to post better performance on a sequential basis. While retail volumes and margin recovery offer support, higher input costs and global softness in refining may drag profitability.

JM Financial expects IOCL’s operating profits to improve quarter-on-quarter (q-o-q) on a low base due to huge inventory losses ($3.7 per barrel) during Q3FY25.

Emkay Global Financial Services said that benchmark gross refining margins (GRMs) corrected to around $3.2 per barrel from $5 q-o-q, largely owing to about 23 per cent sequential decline in gasoline spreads, while gasoil was steady.

Russian crude imports declined, and discounts narrowed during the quarter due to stricter US sanctions, while Middle East official selling price (OSP) premiums were also higher, it added.

“We build in some inventory gain for IOCL due to an elongated cycle,” the brokerage anticipated.

JM Financial said that OMCs’ weighted average auto-fuel gross marketing margin is still strong at ₹7 per litre in Q4FY25 but is lower compared to very strong margins of ₹9.5 a litre in Q3FY25 due to around 4 per cent q-o-q rise in crude price on rupee per litre basis.

Besides, the LPG under-recoveries is likely to be high at around ₹12,200 crore in Q4 FY25 (Q3 FY25: ₹11,700 crore) in the absence of any government compensation, it added.

During Q3 FY25, IOCL reported a 77 per cent year-on-year (y-o-y) decline in consolidated net profit at around ₹2,147 crore in Q3FY25 largely due to foreign exchange and inventory losses. In Q2FY25, it had posted a net loss of around ₹449 crore.

This is despite the company clocking its highest ever refined product sales of 26.13 million tonnes (mt) in Q3 FY25.

The OMCs average gross refining margin (GRM) during 9M FY25 was $3.69 per barrel compared to $13.26 in 9M FY24. Core GRM, after inventory loss, stood at $4.22 per barrel in 9M FY25. In Q2 FY25, its core GRM stood at $2.95 a barrel compared to $13.53 a year-ago.

Globally, the decline in product crack prices impacted IoCL’s GRMs. Cracks is the pricing difference between a barrel of crude oil and the petroleum products refined from it. Diesel crack prices fell to $10.8 a barrel in Q3 2024 from $19.18 in Q3 2023, while gasoline (petrol) cracks declined to $3.63 a barrel from $7.04 per barrel.

The PSU reported around ₹7,800 crore as inventory loss delta in Q3 FY25 as well as about ₹1,900 crore of foreign exchange delta loss. In terms of LPG sales, IOCL said that as on December 31, 2024, it had a cumulative net-negative buffer of ₹14,325 crore.

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Published on April 30, 2025