Indian Oil Corporation Ltd. makes a corporate announcement

The FY25 capex guidance cannot be confirmed from the latest Annual Report evidence. The report covers FY26 and states that FY26 capex was Rs 32,405 Crores, while the target for FY27 was Rs 32,700 Crores ^[1]. If “FY25” means FY2024-25, it should not be conflated with the Rs 34,701 Crores capex target reported during 9M FY2025-26 ^[2].

Funding and leverage balance

• Leverage: At March 31, 2026, the company’s debt-to-equity ratio was 0.54:1, down from 0.75:1 a year earlier, based on borrowings of Rs 1,10,668 Crores and equity of Rs 2,04,544 Crores ^[3]. IndianOil’s stated objective is to keep the ratio below 1:1 ^[3].
• Funding approach: Management describes a “prudent mix” of internal accruals and borrowings for its project portfolio ^[4]. The Annual Report also attributes the reduction in debt to profitability, internal cash generation, working-capital management and centralized treasury operations through its GIFT City platform ^[1].
• Dividend cash requirement: The FY26 disclosure gives a total dividend payout of Rs 11,361.54 Crores, equivalent to 30.87% of PAT ^[5]. Separately, the second interim dividend was Rs 2 per share, payable by April 5, 2026 ^[6]. Mechanically, the full-year dividend payout was about 35.06% of FY26 capex: Rs 11,361.54 Crores divided by Rs 32,405 Crores.
• Capital-allocation flexibility: The Annual Report says the company may adjust dividend payments, return capital or issue shares to manage its capital structure ^[3]. It also reports no fresh long-term debt issuance during FY26 and NCD redemptions of Rs 4,915.20 Crores ^[5].

Implication: IndianOil is not presenting capex as a debt-funded programme. The intended balancing mechanism is internal cash generation first, supplemented by borrowings while keeping debt-to-equity below 1:1; the dividend is a sizeable competing cash use but remains within the stated capital-management framework. A post-dividend pro forma debt-to-equity ratio and a capex-specific split between internal accruals and borrowings could not be confirmed.

IOC’s effective dividend payout for FY2025-26 was 30.87% of standalone net profit, or approximately 31%, implying simple earnings retention of approximately 69.13%.

• Standalone PAT: Rs 36,802.42 Crores ^[7]
• FY26 dividend attributable to the year: Rs 11,361.54 Crores, comprising the Rs 9,640.09 Crores interim dividend and the Rs 1,721.45 Crores proposed final dividend ^[8]
• Derived payout: Rs 11,361.54 Crores / Rs 36,802.42 Crores = 30.87%. The annual report also reports the payout as 30.87% of PAT ^[5]
• Derived retained share: 100% - 30.87% = 69.13%, equivalent to approximately Rs 25,440.88 Crores on a simple PAT less dividend basis.

Alignment with capital allocation

The payout is broadly consistent with a retention-led capital allocation policy. IndianOil states that capital allocation must balance shareholder distributions with operating requirements and long-term growth investments, including refinery expansion, petrochemical integration, logistics, renewables, biofuels and hydrogen-related projects ^[9]. It also identifies the trade-off between refining and petrochemical capacity additions and investments in green hydrogen, renewables and sustainable aviation fuel ^[10].

The retained share of roughly 69% therefore leaves substantial internal earnings available to support this investment programme. This is relevant because IndianOil incurred Rs 32,405 Crores of capex in FY2025-26 and says its project pipeline is financed through a mix of internal accruals and borrowings ^[4]. Petrochemical expansion includes projects such as the Rs 5,894 Crores Acrylics/Oxo-Alcohol complex and other specialty-chemical and base-oil projects ^[11].

Analyst read: the payout signals that IndianOil is returning a meaningful but minority share of earnings while retaining the majority for energy-transition and petrochemical expansion. It is supportive of the stated policy, although the disclosures do not ring-fence the retained Rs 25,440.88 Crores to specific projects; funding also relies on borrowings and other internal cash flows.

Verdict: IOCL’s FY26 refining operations were strong on scale and utilization, but BPCL was more efficient on annual capacity utilization while IOCL remained slightly ahead of HPCL. The latest evidence does not permit a verified Refining-versus-Marketing operating-margin split for IOCL; the available annual-report ratio is an aggregate margin. On current Q2 FY27 GRMs, IOCL’s reported margin is below BPCL and HPCL on a net-of-levy basis, although management’s levy-adjusted figure would place it above both peers. The levy treatment prevents a clean ranking.

Segment-margin comparison

The segment data available for IOCL groups downstream activity under Petroleum Products, rather than providing separate Refining and Marketing operating-margin lines; therefore, the requested segment-wise margins and their five-year averages could not be confirmed. ^[12]

The latest FY26 Annual Report does report IOCL’s standalone aggregate Operating Profit Margin at 5.84%, up from 2.11% in FY25, with the company attributing the improvement to higher refining and marketing margins. ^{[13] [14]}

As a transparent proxy, the consolidated KPI series gives the following aggregate operating-margin history:

• FY26 consolidated operating margin was therefore 2.08 percentage points above its FY22–FY26 average, but this is an aggregate company margin—not a Refining or Marketing margin.
• The trend is cyclical rather than steadily improving: margins were weak in FY23 and FY25, and strong in FY24 and FY26.
• IOCL’s reported annual GRM averaged USD 10.65/bbl across FY21–FY25, derived from annual GRMs of USD 5.64, 11.25, 19.52, 12.05 and 4.80/bbl. ^[20] FY26 annual GRM could not be confirmed from the cited Annual Report extracts.

Refining efficiency: IOCL versus BPCL and HPCL

The FY26 annual comparison is more robust because throughput and utilization are reported for all three companies on the same fiscal-year basis:

Interpretation: IOCL is the scale leader, with FY26 throughput materially above BPCL and HPCL. However, BPCL achieved the strongest asset intensity, operating at 116.6% of capacity versus IOCL’s 107.4%; IOCL was only 1.1 pp ahead of HPCL on utilization. IOCL’s 99.5% operational availability is a positive reliability indicator, but comparable FY26 availability figures for BPCL and HPCL could not be confirmed.

Current GRM and throughput: Q2 FY27

For the latest reported quarter, Q2 FY27, the operating data are:

IOCL’s Q2 throughput was higher in absolute terms than BPCL’s and HPCL’s, but that is primarily a function of its much larger refinery base. On reported GRM, IOCL’s USD 18.52/bbl appears below BPCL’s USD 32.53/bbl and HPCL’s USD 32.15/bbl. That comparison is not like-for-like because IOCL’s headline figure is stated net of SAED, while BPCL and HPCL figures are pre-levy measures.

IOCL management separately cited an SAED-adjusted Q2 FY27 GRM of USD 36.67/bbl, versus USD 18.52/bbl on the other stated basis. ^[28] On that adjusted basis, IOCL would directionally compare above BPCL and HPCL, but the different levy conventions mean this should not be treated as a definitive peer ranking.

Bottom line: IOCL combines the highest refining scale with strong utilization and near-perfect reported availability, but BPCL currently shows superior annual capacity intensity. IOCL’s GRM ranking depends almost entirely on levy normalization: reported net GRM trails peers, while management’s adjusted figure exceeds them. The more fundamental disclosure gap is the absence of a verified standalone five-year Refining-versus-Marketing operating-margin series.