OMCs May See Muted Refining Margins in FY26

SLIPPERY PATH

- ARUNIMA BHARADWAJ

STATE-OWNED OIL MARKETING companies (OMCs) are likely to register subdued gross refining margins (GRMs) during FY26 due to sluggish global consumer and industrial demand, particularly in China, and additional supply from global refinery capacity expansions, according to analysts. However, robust domestic demand for petroleum products, driven primarily by diesel, petrol and LPG, is expected to support healthy marketing margins during FY26.

According to India Ratings, the credit profile of downstream companies is likely to remain stable in FY26. The agency attributes this to strong domestic demand and healthy marketing margins, which are expected to offset the impact of compressed GRMs, resulting in a solid overall EBITDA. "Petrochemical (petchem) EBITDA started improving during FY25, after remaining under pressure during FY24, on account of an improvement in the spreads for petrochemical products," India Ratings stated. The agency predicts that EBITDA for standalone petchem players and the petchem segment of integrated refiners will improve in FY26 compared to the lows seen in FY24.