New Delhi, Aug 27
The Indian oil marketing companies (OMCs) are set to clock strong earnings in current fiscal (FY26) due to lower oil prices and reduced LPG losses, according to a new report.
HSBC Global Investment Research believes that OMCs now have a large margin of safety owing to low oil price and a large capex plan which “gives us confidence that a normative level of earnings (assumed) will still be maintained”.
Lower oil price is supportive of strong auto fuel marketing margins (currently Rs 5-9 per litre) and this augurs well for the FY26 earnings.
In addition, global LPG prices have also decreased, leading to 30-40 per cent reduction in LPG losses per cylinder currently versus Q1 FY26.
“This will result in a lower under-recovery for FY26. While more details are awaited on the pay-out mechanism of Rs 300 billion provisioned by the government towards compensating OMCs for LPG losses (yet to account), these trends present upside risks to earnings forecasts,” the report mentioned.