Indian Oil's return to profit included a ₹6,948 crore inventory gain that can reverse

Indian Oil went from a loss to a large profit in the September 2026 quarter. In Inve's results table, its operating margin, operating profit as a share of sales, was 13.3%, up from 1.5% the quarter before and 9.1% a year ago. On its own basis, the company reported a net profit of ₹21,030 crore after a loss of ₹2,661 crore in the previous three months. Inve's results table, whose profit figures differ from the company's, shows interest and other side income at under a twentieth of profit before tax. Part of it came from an inventory gain that will not repeat on its own.

A refiner buys crude weeks before it sells the petrol and diesel made from it, so when prices climb in between, the oil already in its tanks becomes worth more. Management put that inventory gain at ₹6,948 crore last quarter, across refining and marketing together. It was carrying about 39 days of crude because of geopolitical tensions, and the finance director said plainly that the effect runs both ways: if prices fall, the gains become losses. By our arithmetic, using the company's stated gain and Inve's results table, whose profit figures differ from the company's stated standalone profit, the gain equals about a fifth of the quarter's operating profit. Taking all of it out would leave an operating margin of about 10.6%, still above the year-ago level. The comparison is rough, because the two sources use different bases, but it points one way: the recovery is more than a price effect on stock, and the reported margin still overstates what an ordinary quarter would earn. Nor does the gain explain the swing from the quarter before: in August the finance director said that quarter, too, carried an inventory gain on finished goods, of around ₹15,000 crore, and it still ended in a loss.

By management's account, refining was not where the improvement came from. The government's special additional duty, a levy on refiners' windfall margins, is taken out of the refining margin before the products pass to the marketing arm. After it, the reported gross refining margin was $18.52 a barrel,, against $15.59 the quarter before, a modest rise beside the swing in profit. Asked about the underlying spread, the finance director pointed elsewhere: "It is the marketing levels which are affecting me in a major way."

Household cooking gas is a large part of the marketing problem. Indian Oil sells LPG cylinders at a price the government sets and books the gap to cost as an under-recovery. That gap was ₹184 a cylinder in September, rose in October, and management expects it to reach about ₹370 in December, roughly double. In August the company had expected about ₹250 a cylinder on average for the quarter just ended. The government has covered such losses before: a year ago it approved compensation for past under-recoveries, with ₹14,486 crore of it due to Indian Oil in instalments. Asked whether support or a price change would come this time, the finance director said he would not give forward-looking guidance on matters involving the government, adding only that Indian Oil had kept buying the crude and LPG it needed throughout the crisis. Later he said the company had coped in the first two quarters of the year and was confident it would cope in the third.

Indian Oil is expanding three refineries, at Panipat, Gujarat and Barauni, which would add volume after a ramp-up. Management put them between 90% and 95% complete. A year ago it expected Panipat and Gujarat to be commissioned in June 2026; in August it gave November and December for those two and December for Barauni. On this call it spoke only of commissioning within the current financial year and that throughput would follow five to six months later, with the benefit of the extra volume arriving in the year to March 2028. That is not a stated delay, but it replaces the months named in August with the whole financial year.

Until those units run, crude costs and the prices Indian Oil is allowed to charge for fuel and cooking gas will weigh heavily on its earnings, and management declined to give guidance on government matters for the months ahead.