IOC

Navigates Volatility with Strategic Diversification

is facing near-term uncertainty due to oil price fluctuations, exchange rate volatility, tariffs, and geopolitical unrest. The company's Gross Refining Margin (GRM) fluctuated significantly over the last five quarters (through Q1FY26), ranging from a high of $7.90/barrel to a low of $2.20/barrel, coinciding with crude oil prices falling from over $80/barrel to about $68/barrel. → IOC has implemented a strategic plan called SPRINT since April to strengthen core operations, optimize costs, enhance customer focus, and improve technology. → Under SPRINT, two of its refineries achieved an improved energy intensity index of 93 (lower is better) in the first five months of FY26, down from 97 in FY25. → The company plans a 20% year-on-year reduction in operating expenses (excluding employee costs) for FY26. → IOC is embarking on an aggressive capital expenditure (capex) program of ₹90,000 crore to significantly transform its business mix. → Its refining capacity is set to increase by over 20% in the next 12 months, growing from 81 million tonnes per annum (mtpa) to 98 mtpa. The long-term goal (by FY30) is to shift dependence away from simple refining by materially diversifying into petrochemicals, specialties, renewables, biomass, and gas. → IOC targets increasing its petrochemical intensity from 6% to 15%, with total capacity rising from 4.3 mtpa to 13 mtpa by FY30. This expansion is crucial for offsetting potential growth slowdowns in petrol products due to the rise of Electric Vehicles (EVs). → The green hydrogen plant at Panipat (10,000 tonnes per annum capacity) and blending of jet fuel with Sustainable Aviation Fuel (SAF) are expected to begin operations in FY27. → Despite these expansion plans, the petrochemical segment remains a concern, having reported an EBIT loss of ₹440 crore in FY25 (and eight losses in the past 12 quarters), with spreads expected to remain weak due to significant upcoming capacity additions in China.