State-run oil retailers post ₹30,106 crore combined Q2 net profit on refining boost

India's three state-run fuel retailers—Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL)—posted a combined standalone net profit of ₹30,106 crore for the July-September quarter. The earnings account for nearly 39 per cent of their combined annual earnings and mark a significant recovery from a combined loss of about ₹18,150 crore in the preceding April-June quarter, according to company filings.

The financial turnaround came despite petrol and diesel retail prices remaining frozen since May and domestic LPG rates unchanged since March, even as benchmark crude oil input prices surged. Industry sources noted that the three companies were losing ₹4 to ₹5 per litre on petrol and ₹18 to ₹20 on diesel until last month.

LPG remains a regulated commodity where the government is expected to cover the difference between the retail price and actual cost. IOC Director (Finance) Anuj Jain stated during an investor call that under-recoveries on LPG stood at ₹184 per cylinder in September, rose to ₹229 in October, and are projected to increase further to ₹309 in November and ₹370 in December. Because government subsidies have been delayed, the three companies accumulated total fuel under-recoveries of ₹67,900 crore by the end of September. Individual filings showed IOC accounting for ₹32,505.69 crore, BPCL for ₹17,334.40 crore, and HPCL for ₹18,048.82 crore.

The primary driver for the quarterly profit surge was high refining margins and inventory gains. IOC led the segment with its highest-ever standalone quarterly net profit of ₹21,630 crore—nearly three times its earnings from a year earlier—bolstered by improved refining margins and contributions from its petrochemical and gas businesses. A temporary drop in crude oil prices between mid-June and mid-August reduced feedstock costs and generated an inventory gain of approximately ₹7,000 crore.

Gross refining margins (GRMs) for BPCL and HPCL also expanded notably. HPCL reported a GRM of $32.15 per barrel for turning crude oil into fuels during the September quarter, compared to $8.80 a barrel in the same period last year. BPCL's GRM increased to $32.53 per barrel from $10.78.

However, the recovery remained uneven across the firms. While IOC tripled its profit, BPCL's standalone net profit fell 22.5 per cent year-on-year to ₹4,993 crore, and HPCL's profit declined 9 per cent to ₹3,483 crore.

Looking ahead, IOC has flagged potential pressures on upcoming quarters. The company warned that profitability could be adversely impacted by inventory losses stemming from a potential fall in crude oil prices if the situation in the Middle East normalises, following a hardening of oil prices in October.

"The financial performance of state-run oil retailers demonstrates how external macroeconomic factors like refining margins and inventory gains can temporarily offset core operational pressures such as frozen retail fuel prices and delayed subsidies. While the combined Q2 profit reflects a strong recovery from the previous quarter, businesses operating under regulated price mechanisms must carefully factor in subsidy backlogs and fluctuating crude prices when forecasting long-term financial stability." — Dr. Shishir Gupta, Founder & CEO, StartupLanes