Intro
OMCs likely face weak Q1FY27 earnings due to fuel under-recoveries, LPG losses, and limited margin relief.
New Delhi
India’s oil marketing companies (OMCs) are expected to report weak earnings in Q1FY27, as rising under-recoveries on fuel sales continue to pressure profitability, according to brokerage reports.
Prabhudas Lilladher noted that OMCs are likely to remain under stress due to continued losses on petrol, diesel, and LPG sales, even after recent adjustments in retail fuel prices.
The core issue is “under-recovery,” where companies sell fuel below cost. Estimates suggest Q1FY27 could see losses of ₹74,000–84,000 crore for petrol and diesel alone, with total quarterly losses potentially even higher when LPG is included.
LPG remains a major drag on earnings. Under-recoveries on domestic cooking gas are still significant, with losses of around ₹600–₹700 per cylinder reported in recent months, further weighing on oil company margins.
Although global crude oil prices have eased somewhat following geopolitical de-escalation, analysts say volatility in energy markets and inventory adjustments are likely to limit meaningful relief in refining margins.
Brokerages also flagged that even after multiple small retail fuel price hikes in recent weeks, the increases have not been sufficient to offset the gap between input costs and selling prices. This has left state-run refiners with daily losses running into hundreds of crores, according to government and industry estimates.
Another risk highlighted is the possibility of a gradual rollback of excise duty support, which could further squeeze margins if global crude prices remain elevated.
Overall, analysts expect the first quarter of FY27 to be a challenging period for OMCs, with earnings pressure likely to persist until either fuel prices adjust more fully or crude oil costs stabilise at lower levels.
