Mumbai: S&P Global Ratings on Friday said state-run Indian Oil Corporation could face growing financial pressure as high crude oil prices continue to squeeze fuel marketing margins.
The rating agency said the ongoing tensions in West Asia and possible disruptions in the Strait of Hormuz may increase crude oil prices further. This could widen the gap between domestic fuel prices and the cost of imported crude oil, affecting IOC’s earnings and cash flow over the next year.
India is the world’s third-largest importer of crude oil and depends heavily on overseas supplies to meet domestic demand. Diesel alone accounts for nearly 39 percent of the country’s petroleum consumption.
Balancing Public Duty And Profitability
According to S&P, IOC is in a difficult position because it has to ensure uninterrupted fuel supply while also managing losses caused by expensive crude oil.
The agency said there is uncertainty around the company’s earnings and cash generation if the Middle East conflict continues for a longer period. Limited increases in domestic petrol and diesel prices could further hurt profitability.
S&P also warned that prolonged supply disruptions may create feedstock shortages for refiners and increase pressure on IOC’s liquidity position.
Strong Financial Support Seen
Despite the risks, S&P said IOC has several strengths that may help it handle short-term stress.
The company has strong relationships with banks and access to funding markets through working capital lines and commercial paper issuances.
S&P also noted that IOC holds minority stakes in Oil and Natural Gas Corporation, Oil India Limited and GAIL (India) Limited, with a combined market value of more than $3 billion, providing additional financial flexibility.
The agency further said there is a very high possibility of government support if IOC faces financial stress.
Strong FY26 Performance
IOC reported stronger-than-expected earnings for FY26, supported by healthy fuel demand, better refining margins and working capital gains.
According to S&P, the company generated EBITDA of more than Rs 76,000 crore and free operating cash flow of around Rs 40,000 crore during the financial year ended March 2026.
