Morgan Stanley highlights strong profitability at OMCs, says Russian crude discounts continue
Morgan Stanley has highlighted the strong performance of India's state-owned oil marketing companies (OMCs) — BPCL, HPCL and IOCL — in the first quarter of FY26, noting that they collectively delivered US$2.8 billion in profits, US$2.0 billion in operating cash flow, and de-leveraged their balance sheets by US$4.4 billion. The brokerage said average return on equity stood at 18% during the quarter, reflecting healthy margins and improved balance sheet strength.
Russian crude sourcing continues to play a critical role, with discounts in the US$2–3 per barrel range. BPCL expects around 35% of its crude sourcing to come from Russia this fiscal year, while HPCL's stood at 13% in the first quarter. EBITDA per barrel was between US$10 and US$15, around twice the long-term average for BPCL, as margins outperformed, while HPCL benefitted from cost improvements. IOCL, however, continued to underperform on margins relative to its peers.
Morgan Stanley also flagged intensifying competition in the industrial diesel segment, where private players are offering larger discounts and gaining improved access to fuel infrastructure. Losses from subsidised cooking gas sales were compensated at around US$3 per barrel, helping support earnings. The brokerage said the OMCs' profitability reflects strong operational leverage and stable crude dynamics, although competitive pressures in certain segments warrant attention.
Disclaimer: The views and recommendations made in this article are those of Morgan Stanley. This article does not constitute investment advice. Investors should consult their financial advisors before making any investment decisions.
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