Indian Oil Q3 FY26 Results: Strong Earnings Momentum Driven by Refining Upswing and Government Support

Indian Oil Corporation Ltd (IOCL), India’s largest integrated oil marketing company, reported a strong set of financial results for Q3 FY26, reflecting a sharp improvement in profitability amid higher refining margins, steady fuel demand, and timely government compensation for LPG under-recoveries. The performance marks a clear turnaround from the subdued earnings environment seen in the previous year.

Key Financial Highlights (Q3 FY26)

• Standalone Net Profit: ₹12,126 crore

• Consolidated Net Profit (attributable to equity holders): ₹13,007 crore

• Standalone Revenue from Operations: ₹2.32 lakh crore

• Consolidated Revenue from Operations: ₹2.36 lakh crore

• Standalone EPS: ₹8.81

• Consolidated EPS: ₹9.44

Both standalone and consolidated results showed substantial year-on-year improvement, supported by stronger operating margins and higher throughput across the refining and pipeline network.

What Drove the Strong Performance?

1. Sharp Improvement in Refining Margins

Indian Oil’s refining business benefitted significantly from favorable global refining conditions.

• Average Gross Refining Margin (GRM) for 9M FY26: $8.41 per barrel

• Core GRM (adjusted for inventory impact): $9.86 per barrel

This compares with a much lower GRM of $3.69 per barrel in the corresponding period last year, highlighting the scale of margin recovery during FY26 so far.

2. Government Compensation for LPG Under-Recoveries

A key earnings stabiliser during the quarter was the government’s approval of compensation for LPG under-recoveries.

• Total approved compensation: ₹14,486 crore

• Recognised during Nov–Dec 2025: ₹2,414 crore

This recognition directly boosted revenue from operations and reduced the cumulative negative LPG buffer balance, improving near-term cash flows and earnings visibility

3. Strong Operating Leverage Across Core Segments

Higher volumes and better cost absorption translated into improved margins:

• Standalone operating margin: 7.23% (vs 1.49% in Q3 FY25)

• Standalone net profit margin: 5.23% (vs 1.33% in Q3 FY25)

This reflects operating leverage kicking in as demand remained stable while margins expanded meaningfully

Segment Performance Snapshot

Petroleum Products

• Remained the primary earnings driver

• Segment PBT (before interest & exceptional items) rose sharply on the back of stronger refining and marketing margins

Gas Business

• Continued to deliver steady profitability

• Benefitted from stable volumes and pricing environment

Petrochemicals

• Reported losses during the quarter

• Margins remained under pressure due to global oversupply and weak downstream spreads

Overall, the core petroleum and gas segments comfortably offset weakness in petrochemicals, supporting consolidated profitability

Balance Sheet and Financial Ratios

Indian Oil’s balance sheet indicators improved alongside earnings:

• Debt-equity ratio (standalone): 0.60

• Interest coverage ratio: 9.63x

• Net worth (standalone): ₹1.93 lakh crore

Improving coverage ratios signal better debt-servicing comfort as profitability recovers

Outlook: What to Watch Going Ahead

• Sustainability of refining margins: GRMs will remain the single biggest earnings lever

• Government policy support: Continued LPG compensation remains critical for cash-flow stability

• Petrochemical cycle: Recovery here could add incremental upside

• Crude price volatility: A key variable influencing inventory gains/losses and marketing margins

Bottom Line

Indian Oil’s Q3 FY26 results underline a clear earnings recovery, driven by a favourable refining cycle, operational scale, and government support mechanisms. While earnings remain sensitive to global energy cycles and policy decisions, the current quarter demonstrates the company’s ability to translate margin tailwinds into strong bottom-line performance.

For long-term investors, IOCL’s results reaffirm its role as a strategic energy PSU with improving profitability when macro conditions align, while near-term performance will hinge on how refining margins and fuel pricing evolve over the coming quarters