OMC stocks to buy: Refining margin boost, decline in crude prices and lower LPG under recoveries boosted the performance of oil marketing companies (OMCs) during the third quarter of the financial year 2025-26 (FY26).
Oil marketing companies’ EBITDA and PAT came in at ₹39,500 crore and ₹23,740 crore, respectively for Q3FY26 – up 91% or 2.4x year-on-year, according to estimates by ICICI Securities.
Earnings snapshot
In terms of individual performance, Indian Oil Corporation (IOCL) posted a four-fold rise in its standalone PAT to ₹12,125.86 crore in October-December. Its revenue from operations rose to ₹2.31 lakh crore from ₹2.16 lakh crore in Q3 of the previous 2024-25 fiscal.
Without giving quarterly numbers, IOC said it earned $8.41 on turning every barrel of crude oil into fuel during April-December 2025 against a cross-refining margin of $3.69 per barrel.
Meanwhile, Hindustan Petroleum Corporation‘s (HPCL) standalone net profit of ₹4,072.49 crore in the October-December period was 35% higher year-on-year (YoY). Revenue from operations rose to ₹1.24 lakh crore from ₹1.19 lakh crore.
HPCL earned $8.85 from turning every barrel of crude into fuel as compared to $6.01 per barrel in Q3 of the previous financial year.
Coming to Bharat Petroleum Corporation (BPCL), the picture was similar. Its standalone net profit of ₹7,545.27 crore Q3 FY26 was 62% YoY higher than ₹4,649.20 crore in the year-ago period. Its revenue increased 7% YoY to ₹1.36 lakh crore.
BPCL said it earned $9.68 on turning every barrel of crude oil into fuel so far in the current fiscal, up from $5.95 per barrel in the same period last year.
The improvement in refining margins was supported by agile inventory management, a decline in crude oil prices, healthy product cracks, and wider discounts on Russian crude due to US restrictions on Russian crude oil trade, as highlighted by Care Ratings in a recent report.
Which OMC fared best in Q3?
According to domestic brokerage Motilal Oswal Financial Services (MOSL), Q3 was another strong quarter for the OMCs. In terms of individual performance, IOCL beat MOSL’s estimates, BPCL met them, and HPCL’s Q3 show was below expectations.
“IOCL posted the highest absolute profit because of its size and large refining capacity. BPCL’s performance was also strong, and it looks slightly better placed in terms of operational efficiency and overall consistency. HPCL has improved, but its earnings tend to fluctuate more when marketing margins change,” observed Dr Ravi Singh, Chief Research Officer at Master Capital Services.
Oil price tailwinds
OMCs are also enjoying the benefits of softening crude oil prices. Last year, oil witnessed its worst annual fall since the Covid-19 pandemic amid supply glut from oil producers and declining demand.
Brent crude futures started the year on a strong note with a 16% rise in January. The gains have fizzled in the current month amid a month-to-date decline of 3.5%. Brent crude oil prices continue to trade around $68, and WTI crude at $63.
When crude prices soften, OMCs usually benefit because their raw material cost comes down. That helps the refining margins and improves profits, as visible in Q3 results.
Headwinds faced by OMCs
Q3 performance was also supported by LPG under-recoveries. Two equal monthly instalments of LPG compensation, totalling ₹24.1 billion, ₹12.7 billion, and ₹13.2 billion, were recognised by IOCL, BPCL, and HPCL, respectively, in Q3.
While LPG under-recoveries moderated quarter-on-quarter in Q3, the relief appears short-lived, as they are expected to revert to Q2 levels — or even rise further — in Q4 amid higher Saudi propane prices, opined MOSL.
Another major driver— gross refining margins could also take a hit. Strategic advantage derived from procuring discounted Russian crude — at one point accounting for nearly 35-40% of India’s crude oil import portfolio — is now expected to moderate significantly going forward. A defining medium-term development emerged in February 2026: in exchange for a reduction in US tariffs on imports of Indian goods from an effective 50% (including penalties) to 18%, India is likely to reduce purchases of discounted Russian crude oil.
Against this backdrop, CareEdge Ratings expects GRMs of OMCs to moderate going forward, with a reduction in the share of Russian crude oil in their overall sourcing mix. In contrast, simultaneously, their marketing margins are expected to improve in the near term, assuming no change in retail fuel prices, it said.
Which OMC stocks to buy?
OMC stocks also carry policy risk, cautioned Singh. “If the government controls fuel prices, margins can shrink quickly.” After the recent rally, a lot of the positive news is already priced in; so the risk-reward is reasonable, but not extraordinary, he added.
He advised that oil PSU stocks are better suited for steady, medium-term investors looking for dividends and stable returns rather than quick gains.
“From an investment point of view, BPCL looks a bit more balanced right now. IOCL is strong but more exposed to government policy decisions. HPCL may offer upside but carries slightly higher volatility,” he opined while suggesting which OMC stocks to buy.
Just like on the earnings front, on technical charts, too, IOCL stands out, according to Drumil Vithlani, Technical Analyst at Bonanza. “Among peers, Indian Oil Corporation stands out on technical parameters with a bullish hammer formation and a clear higher high–higher low structure. As long as the stock holds above ₹160, the medium-term trend remains positive, with potential upside toward ₹195–200. Any dip toward ₹175–173 could offer a buying opportunity,” he said.
In comparison, Bharat Petroleum Corporation and Hindustan Petroleum Corporation Limited appear relatively range-bound, he said, while retaining a positive outlook for the sector and reinforcing the need to be selective.
Meanwhile, domestic brokerage MOSL said it continues to prefer HPCL among OMCs. “We view the ramp-up of its bottom-upgrade unit by the end of FY26, and the start of its Rajasthan refinery by Dec’25 as key catalysts for the stock,” it said.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.
