Will Operating Profits of OMCs Increase by 50% Due to Stronger Marketing Margins?
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Synopsis
Oil marketing companies are on track for a staggering increase in operating profits, anticipated to rise by over 50% this fiscal year, bolstered by stable retail fuel prices and improved marketing margins. This financial uplift will significantly impact their capex plans and overall market performance.
Key Takeaways
- Projected operating profit increase of over 50%.
- Operating profit expected to reach $18-20 per barrel.
- Strong marketing margins due to stable retail fuel prices.
- Capex plan of Rs 90,000 crore focused on capacity expansion.
- Improvement in debt-to-EBITDA ratio to 2.2 times.
New Delhi, Nov 21 (NationPress) Oil marketing companies (OMCs) are projected to experience a remarkable increase of over 50% in operating profit, reaching between $18 and $20 per barrel this fiscal year, a substantial rise from $12 in the previous fiscal, as reported on Friday.
This surge in operating profit is anticipated to be fueled by enhanced marketing margins, attributed to stable retail fuel prices and favorable crude oil conditions, according to a report from Crisil Ratings.
The anticipated boost in marketing margins for petrol, diesel, and various petroleum products is expected to significantly counterbalance a decline in refining margins, which is a result of a global shift towards cleaner energy sources and a reduction in fossil fuel demand.
The resulting healthy profits will bolster the capital expenditure (capex) strategies of OMCs, thereby strengthening their credit metrics.
Analysts have forecasted that crude prices may decrease to between $65 and $67 per barrel this fiscal, with gross refining margins falling to between $4 and $6 per barrel.
"With retail fuel prices remaining unchanged, the marketing margin is projected to rise to $14 per barrel (approximately Rs 8 per liter), leading to an overall margin improvement exceeding 50%, reaching $18-20 per barrel,” stated Anuj Sethi, Senior Director at Crisil Ratings.
This increase in overall returns is expected to elevate cumulative cash accruals to between Rs 75,000 and 80,000 crore this fiscal, compared to Rs 55,000 crore in the last fiscal.
This development is set to support the ambitious Rs 90,000 crore capex initiative of OMCs, primarily aimed at brownfield capacity expansion, as per the report.
Approximately 80% of the planned capex is designated to meet domestic demand for petroleum and petrochemical products, while the remaining funds are allocated for product pipelines, marketing infrastructure, and green energy projects.
The debt-to-EBITDA ratio for OMCs is expected to improve to 2.2 times this fiscal, a decrease from 3.6 times in the previous fiscal, the report highlighted.
Point of View
It is essential to note that the anticipated increase in operating profits for oil marketing companies reflects a significant shift in the energy market. This trend is indicative of broader economic factors and could have lasting implications for consumers and the energy sector in India. Our commitment is to keep the nation informed about these developments while ensuring transparency and accuracy in our reporting.
NationPress
21/11/2025
