Detailed Rationale

Crisil Ratings has assigned its ‘Crisil AAA/Stable’ rating to the Rs 3000 crore non-convertible debentures (NCDs) of Indian Oil Corporation Limited (IOCL) and has reaffirmed its ‘Crisil AAA/Stable/Crisil A1+’ ratings on the existing NCDs and bank facilities of the company. Crisil Ratings has also withdrawn its rating on NCDs worth Rs 4,620 crore upon their maturity and on NCDs worth Rs 5 Cr which won't be issued (see 'Annexure- Details of Rating Withdrawn'). The withdrawal is in line with the Crisil Ratings withdrawal policy.
 

The ratings continue to reflect the dominant position of IOCL in the oil refining and marketing sector in India and its strong operating efficiency. The ratings also factor in the company's strategic importance to the Government of India (GoI) and expectation of continued support from it. These strengths are partially offset by exposure to project implementation risk and inherent volatility in operating profitability owing to fluctuations in input prices.

 

In fiscal 2025, IOCL witnessed a notable decline in the operating profit to Rs 39,724 crore, from Rs 75,377 crore in fiscal 2024. The drop in profitability comes after an exceptional performance in fiscal 2024 driven by favorable global refining margin, strong product demand and advantageous market conditions. In fiscal 2025, gross refining margin (GRM) moderated to $4.8/barrel (bbl) against $12.5/bbl in fiscal 2024 due to global economic slowdown, moderation in product crack spreads and volatility in global oil price. The petrochemical segment has also faced challenges in fiscal 2025 due to weaker demand and falling margin, driven by the cyclical nature of the industry. The geopolitical tensions in the Middle East and Eastern Europe, with high inflation in key economies, contributed to weak demand for refined products and petrochemicals. Furthermore, profitability was also affected due to under recoveries in the liquefied petroleum gas (LPG) segment. Despite these challenges, IOCL’s operating income showed resilience, amounting to Rs 7.6 lakh crore in fiscal 2025, slightly lower than Rs 7.7 lakh crore in fiscal 2024.
 

The increase in excise duty on petrol and diesel by Rs 2/litre effective from April 2025 is likely to be offset by reduction in crude oil prices. In the medium term, IOCL’s performance will be influenced by several factors, including refining margin stability, subsidy pressures and the petrochemical market's growth prospects. The company's investments in refining and pipeline infrastructure, with potential policy adjustments on fuel pricing, will be key factors in determining its medium-term operational and financial position.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of IOCL and its subsidiaries and joint ventures (JVs); the subsidiaries have been fully consolidated, and the JVs have been proportionately consolidated. These entities are strategically important to IOCL and have considerable operational linkages with IOCL. The ratings also factor in government support.
 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Strategic importance to GoI and continued support from GoI: Oil refining and marketing is strategically important for India's economic development. Oil marketing companies (OMCs) dominate the domestic market for key petroleum products, such as motor spirits, high-speed diesel, superior kerosene oil and LPG. Unhindered supply of these products in the domestic market depends on the smooth operations of OMCs such as IOCL. The company should therefore remain strategically important to GoI and continue to play a key role in implementing the government's socio-economic policies. GoI also holds 51.5% stake in IOCL and exerts management control. Any diminution in the company's strategic importance or in the GoI’s shareholding will remain key monitorable.

 

• Dominant position in the oil refining and marketing sector: IOCL dominates the oil refining and marketing sector. With 11 refineries, the company accounted for 31% of the refining capacity of India as on March 31, 2025, and held around 42% share in the petroleum products market in fiscal 2025. Large integrated operations, geographically diversified refining capacities and high utilisation enhance operational efficiency. The company’s market position is underpinned by its entrenched marketing and distribution infrastructure, with 40,221 retail outlets and 12,919 LPG distributors as on March 31, 2025, with aggressive branding and marketing exercises. These initiatives should help IOCL maintain a dominant share in the domestic petroleum market.
   

Weaknesses:

• Modest financial risk profile: Consolidated gearing has marginally deteriorated to 0.78 time as on March 31, 2025, from 0.74 time as on March 31, 2024. Reduced profitability has resulted in moderation of the debt protection metrics, which is reflected in the interest coverage ratio of 4.48 times for fiscal 2025, as against 10.29 times in the previous fiscal and Net Debt/EBITDA of 3.2 times for fiscal 2025 against 1.6 times for fiscal 2024. Degree of reliance on debt to meet the annual capex of Rs 30,000 crore will remain a key monitorable.

 

• Susceptibility to volatility in crude oil prices and forex fluctuation: Crude oil prices have been volatile over the past few years. Prices of crude oil for Indian basket fell sharply to a low of around $20/bbl in April 2020 before rising sharply to over $110/bbl in March 2022; average procurement price stood at around $93/bbl in fiscal 2023, $84/bbl in fiscal 2024 and around $79/bbl in fiscal 2025. Average inventory of crude oil and finished goods of 70-80 days make the operating performance of IOCL vulnerable to fluctuations in valuations of inventory stock. IOCL imports 80-85% of its crude oil requirement and, thus, remains susceptible to volatility in the rupee-dollar exchange rate and a corresponding increase in the value of imports. IOCL compensates for these volatilities through the marketing margin, and the company’s ability to continue to do so will remain a key monitorable.
   
• Exposure to project implementation risk: IOCL is at various stages of implementation of large projects which is targeted to increase its refining capacity, pipeline infrastructure, petrochemical complex and city gas distribution (CGD) capabilities and reach. The complexities in each of these projects vary depending on the scope, technical requirements and location while the risks depend on implementation, timelines, and technology. At present, IOCL is implementing refinery expansion projects at Panipat, Gujarat, Barauni and at Cauvery Basin through its JV apart from a petrochemical complex at Paradip, various pipelines and CGD projects. A few of these projects are delayed with the company continuing to be exposed to such project implementation risks given it has plans to incur about Rs 30,000 crore in capex each year over the medium term.

Liquidity: Superior

IOCL, a Maharatna company, enjoys strong financial flexibility, driven by support from GoI. The company's portfolio of oil bonds, large unutilised bank limits and access to low-cost funds from domestic and overseas markets can help raise resources when needed. Amongst, the total fund based limits of Rs 103,060 crore, utilisation has averaged at 65% in fiscal 2025.
 

Healthy cash accruals and available liquidity should be sufficient to meet scheduled debt repayment obligations of Rs 11,300 crore in fiscal 2026 and ~Rs 11,100 crore in fiscal 2027. IOCL’s annual capex plans of around Rs 30,000 crore is expected be funded through a mix of operational cash flow and external borrowings.
 

Environment, social and governance (ESG) profile

Crisil Ratings believes IOCL’s ESG profile supports its strong credit risk profile.

The oil and gas sector has a moderate environmental and social impact, primarily driven by its raw material sourcing strategies, waste-intensive process, and its direct impact on the health of the environment.

 

Key ESG highlights:

• IOCL has set a target to achieve net-zero emissions from its operations by 2046 and in line with this commitment, it is undertaking several projects which includes developing a green energy portfolio, with a target to achieve 31 GW of renewable energy capacity, 4 MMT of biofuels processing capacity and 1 MMT biogas facility by 2030. Furthermore, it is in the process of setting up a green hydrogen plant with 10 KTPA capacity at its Panipat refinery.
• The company has a high waste recycling rate (~80%) and has taken various measures for recycling and reprocessing of hazardous waste generated.
• IOCL’s lost time injury frequency rate among employees and workers is lower compared to peers (0.024 time for employees, and 0.032 time for workers) and it reported nil employee fatalities in fiscal 2024.
• IOCL’s governance structure inter-alia is characterized by extensive financial disclosures, and high investor complaints redressal rate (100%). However, there is low representation of Independent Directors on the Board consequent upon end of tenure of some independent directors recently. As on date, the Board comprises of twelve directors, of which only three are independent directors constituting less than 50% of the board strength. IOCL being a Government Company under the administrative control of the Ministry of Petroleum & Natural Gas, the power to appoint Directors on the Board vests with Government.

Outlook: Stable

IOCL will continue to benefit from its leadership position in the domestic oil refining and marketing segment and its strategic importance to the GOI.

Rating sensitivity factors

Downward factors:

• Higher-than-expected and sustained deterioration in IOCL’s performance
• Change in GoI’s support philosophy or reduction in stake below 51%

About the Company

IOCL, a GoI undertaking, was formed in 1964 with the merger of Indian Refineries Ltd (incorporated in 1958) and Indian Oil Company Ltd (incorporated in 1959). IOCL is an integrated oil refining and marketing company. Along with its subsidiary, Chennai Petroleum Corporation Ltd (rated 'Crisil AAA/Stable/Crisil A1+'), IOCL controls 11 refineries across India, with a combined capacity of 80.8 million tonne per annum, which accounts for 31% of the country's total capacity. As on March 31, 2025, GoI held 51.5% stake, ONGC held 14.2%, Oil India held 5.16%, insurance companies held 7.12% and the balance was held by public and others.

 

IOCL through a JV (along with CPCL) is also setting up a 9-MMTPA refinery at Cauvery Basin, Nagapattinam, at an estimated project cost of Rs 38,830 crores.

Key Financial Indicators)*

Particulars	Unit	2025	2024
Operating Income	Rs crore	761,620	775,698
Profit after tax (PAT)	Rs crore	13,789	42,889
PAT margin	%	1.8	5.5
Adjusted debt/adjusted networth	Times	0.78	0.74
Adjusted interest coverage	Times	4.5	10.3

*Above numbers reflect analytical adjustments made by Crisil Ratings

Any other information: Not applicable