IGI Logo

Strong refining performance boosted by inventory gains

IOCL reported a significantly higher than expected standalone EBITDA of INR306.4bn (PLe: INR90.8bn; BBGe: INR115.0bn), driven by strong refining performance and refining/marketing inventory gains of INR69.0bn. Reported GRM (net of SAED) improved to USD18.5/bbl in Q2FY27 vs USD15.6/bbl in Q1FY27, while refining throughput increased 2.8% YoY to 18.1mmt. Consequently, PAT came in above estimates at INR216.3bn (PLe: INR34.9bn; BBGe: INR62.7bn), supported by higher other income. Major refining expansion projects at Panipat, Barauni and Gujarat are targeted for completion in FY27. Factoring in the strong 1HFY27 performance, we estimate FY27E reported GRM at USD17.5/bbl. For FY28E/FY29E, we estimate GRM of USD7.5/7.3/bbl, respectively, as the current strong cracks environment normalizes. Implied GMM is estimated at INR4.7/4.6/ltr for FY28E/FY29E, respectively. We maintain 'Accumulate' with a revised TP of INR140 (earlier: INR138), based on 0.7x (unchanged) Sep'28E P/BV.

Refining and Marketing gains supported profitability:

Refining throughput increased 2.8% YoY but declined 5.5% QoQ to 18.1mmt in Q2FY27. IOCL reported GRM (net of SAED) of USD18.5/bbl, up from USD15.6/bbl in Q1FY27 and USD10.7/bbl in Q2FY26. Additionally, refining and marketing inventory gains of ~INR69bn provided significant support to overall profitability. Crude inventory currently stands at 39 days (vs. normal 33-35 days) due to the ongoing war, while MS/HSD inventory is typically maintained at 25 days and LPG inventory currently stands at 20 days (vs. normal 17-25 days).

Marketing volumes for petroleum products declined QoQ:

Total domestic sales volume of petroleum products stood at 20.9mmt vs 22.5mmt in Q1FY27 and 20.2mmt in Q2FY26. MS and HSD volumes declined by 2.2% and 17.2% QoQ, while LPG volumes rose 12.5% QoQ. Management indicated that domestic MS and HSD consumption grew by 8.5% and 7.5% YoY, respectively, as per PPAC. IOCL commissioned 126 retail outlets during the quarter, bringing its total network to 43,245 outlets.

EBITDA/PAT significantly beat estimates: IOCL surpassed the estimates reporting a standalone EBITDA (including Fx loss of INR6.7bn) of INR306.4bn (PLe: INR90.8bn; BBGe: INR115.0bn) vs INR20.2bn in Q1FY27 and INR145.9bn in Q2FY26, supported by inventory gains of INR69.0bn. As a result, PAT came in above estimates at INR216.3bn, supported by higher other income and partly offset by increase in interest expense and D&A (PLe: INR34.9bn; BBGe: INR62.6bn) vs INR76.1bn in Q2FY26 and loss of INR-26.6bn in Q1FY27.

Petrochem EBIT improved QoQ/YoY: Petrochemical volumes recovered 11.4%/11.7% YoY/QoQ to 0.9mmt. Segment EBIT increased to INR5.2bn in Q2FY27 vs INR2.2/1.7bn in Q1FY27/Q2FY26. Paradip PX-PTA project was mechanically completed in Sep’26, with commissioning activities underway.

LPG under-recovery buffer continued to rise: IOCL recognized LPG compensation of INR36.2bn in Q2FY27, taking the total compensation recognized to INR72.4bn in 1HFY27. The cumulative net negative LPG buffer stood at INR325.1bn as of Sep’26, vs INR297.3bn as of Mar’26. Management indicated that LPG under-recoveries increased from INR184/cyl in Sep’26 to INR229/cyl in Oct’26, INR309/370/cyl in Nov/Dec’26.

Performance in 1HFY26 remains strong: IOCL reported standalone EBITDA/PAT of INR326.6bn/189.7bn in 1HFY27, up 20.1% and 42.6% YoY. Refining throughput increased 2.7% YoY to 37.3mmt. Reported GRM stood at USD17.0/bbl vs USD6.3/bbl YoY.

Please refer disclaimer at Report
SEBI Registration number is INH000000933