State-run Indian Oil Corporation (IoCL) is expected to incur a capex of ₹34,000 crore in the current financial year, ending March 2025, and around ₹37,500 crore in FY26, Fitch Ratings said on Monday.
Besides, the country’s largest oil marketing company’s (OMC) refining capacity is likely to grow to more than 70 million tonnes by March 2026.
“We forecast capex of ₹34,000 crore in FY25-above IOC’s target of ₹30,900-37,500 crore thereafter to account for higher energy-transition spending. We expect capex to be spent across a number of segments, including refining, marketing, pipeline, petrochemicals, alternative energy and city gas distribution,” the ratings agency said.
Fitch also forecast IoCL’s refining capacity to reach 87.9 million tonnes (mt) by end-FY26, from 70.3 mt currently, as IoCL expands the Barauni, Koyali and Panipat refineries, while petrochemical capacity should reach 7 mt by FY27, from 4.4 mt currently.
“We expect refining capex intensity to wane over the medium term, while energy-transition capex rises. The government has announced ₹15,000 crore of capital support to the three state-owned OMCs in FY25, which could buffer capex, but we do not include this in our base case,” it added.
Marketing margins
Fitch expects the Maharatna company’s marketing margins to remain steady.
“We forecast a steady marketing margin for FY25, notwithstanding the March 2024 ₹2 per litre cut in diesel and petrol retail prices, the first price change in around 22 months. We expect the margin to be supported by a decline in the Brent crude oil price to $77.5 per barrel in FY25, in line with Fitch estimates, from $82 in FY24,” it said.
Fitch expects IoCL’s FY25 EBITDA to fall from the peak FY24 level, but to remain healthy for its standalone credit profile (SCP), driven by a moderating refining margin from the higher than usual levels in FY23-FY24, it said.
The fall is likely to stem from lower product cracks amid weak Chinese demand and curtailed Asian petroleum product exports as well as a reduced benefit from pricing differences between crude varieties, it added.
“We see fuel prices returning to more frequent revisions, aligned with crude oil prices, once industry conditions stabilise. Nonetheless, rising crude prices amid geopolitical uncertainty could present near-term risks,” Fitch said.
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