Synopsis: IOCL is reshaping its business to reduce reliance on traditional fuels by targeting 20–30% revenue from non-fuel segments by 2030, focusing on gas, petrochemicals, lubricants, and renewables to ensure long-term growth and stability.
Indian Oil Corporation Limited (IOCL), India’s largest oil marketing company, is at a strategic inflection point as it prepares for a future shaped by energy transition, evolving consumer needs, and sustainability imperatives. While fuels continue to dominate its revenue base, IOCL is increasingly looking beyond traditional petroleum products to build new growth engines that can support long-term earnings stability. This shift reflects not just a response to global decarbonisation trends, but also a conscious effort to future-proof revenues in a rapidly changing energy landscape.
Indian Oil Corporation Ltd, with a market capitalization of Rs. 2,20,714.96 crore, closed at Rs. 156.30 per equity share, down by 1.73 percent from its previous day’s close price of Rs. 159.05 per equity share.
Indian Oil Corporation Ltd has delivered returns across multiple timeframes, with a 1-month return of -4.29 percent, a 3-month return of 1.49 percent, and a 6-month return of 2.82 percent The stock has delivered a 19.86 percent return in the past 1 year and in the longer frame of 5 years it has delivered a return of 141.70 percent.
Indian Oil Corporation Limited (IOCL), founded in 1959 and based in New Delhi, is India’s largest oil and gas company, operating across petroleum, petrochemicals, gas, and alternative energy sectors both domestically and internationally. Its core businesses include refining, exploration and production of crude oil and gas, pipeline transportation, marketing of petroleum products, LPG and gas, petrochemicals, lubricants, and retail fuel stations.
IOCL is also active in clean energy initiatives such as wind, solar, and alternative fuels, as well as R&D, battery technology, and shale gas projects. Additionally, it provides aviation refueling, bunkering, terminalling, and financial services, serving consumers, businesses, suppliers, and society at large.
A Strategic Shift
Indian Oil Corporation (IOC), long known for its dominance in petrol, diesel, and aviation fuel, is embarking on a major strategic pivot to diversify its revenue streams. Currently, nearly 85–90 percent of the company’s revenue comes from traditional fuels. Under the leadership of Chairman AS Sahney, IOC aims to increase the share of revenue from non-fuel businesses to 20–30 percent by 2030, up from roughly 10 percent today. This move would expand the non-fuel business to an estimated Rs. 2–3 lakh crore, signaling a significant transformation in the company’s overall business mix.
Targeted Growth
The company has outlined ambitious growth targets across multiple non-fuel verticals. Natural gas, currently a Rs. 30,000 crore business, is expected to at least double over the next four years, having already seen a similar doubling in the past two years. Petrochemicals, valued at Rs. 28,000 crore, is also set for expansion to about Rs. 50,000 crore, with a focus on specialty chemicals. Lubricants, currently Rs. 13,000 crore, are targeted to rise to Rs. 20,000 crore, with greater emphasis on automotive lubricants where IOC has lagged previously. Additionally, the company is exploring renewable energy, biofuels, and potentially nuclear energy as part of its long-term diversification strategy.
IOC is also working to consolidate its gas operations, which are currently divided between bulk industrial supply under the business development division and city gas distribution under the pipeline division. Bringing these under a single entity is expected to streamline operations, improve efficiency, and support future growth.
Efficiency and Profitability
This diversification is being supported by the Sprint programme, which focuses on core business efficiency, customer centricity, cost consciousness, leadership development, and technology adoption. Cost discipline measures have already delivered annual savings of Rs. 2,000 crore. One notable initiative is the shift from captive power plants to grid power wherever it is cheaper and reliable, raising the grid’s share of power consumption from below 20 percent to a targeted 30–40 percent. Product optimization is another critical step, with IOC reducing low-return products such as naphtha, bitumen, fuel oil, and sulphur, while converting more naphtha into petrol to improve profitability.
Financials
On a year-on-year basis, IOCL’s revenue increased to Rs. 1,78,628 crore in Q2FY26 from Rs. 1,74,976 crore in Q2FY25, registering a 2.1 percent growth, indicating steady business performance. EBITDA saw a sharp rise to Rs. 16,245 crore from Rs. 3,467 crore, a strong 369 percent YoY increase, reflecting significant improvement in operating margins. Profit after tax turned positive at Rs. 8,191 crore, compared to a loss of Rs. 449 crore in Q2FY25, highlighting a clear earnings turnaround.
On a quarter-on-quarter basis, revenue declined to Rs. 1,78,628 crore in Q2FY26 from Rs. 1,92,341 crore in Q1FY26, a 7.1 percent drop, suggesting some moderation in topline performance. However, profitability remained strong, with EBITDA rising 22.5 percent QoQ from Rs. 13,267 crore to Rs. 16,245 crore, while profit increased 20.3 percent QoQ from Rs. 6,808 crore to Rs. 8,191 crore, underlining continued improvement in operational efficiency despite lower revenues.
Over the past five years, the company has demonstrated strong growth, achieving a revenue CAGR of 9 percent, a profit CAGR of 22 percent, and a price CAGR of 19 percent reflecting its operational performance and market confidence.
A return on equity (ROE) of about 6.51 percent and a return on capital employed (ROCE) of about 7.36 percent, and debt to equity ratio at 0.74 demonstrate the company’s financial position. The stock is currently trading at a P/E of 9.04x lower as compared to industry P/E of 10.5x.
Looking Ahead
By 2030, the company envisions a fundamentally different revenue structure, with non-fuel verticals contributing a substantial portion of earnings. This diversification not only reduces dependence on conventional fuels but also positions IOC in higher-margin sectors like petrochemicals, gas, lubricants, and renewables. While stock prices may not yet reflect the full scope of these plans, the strategic focus on profitability, efficiency, and high-growth sectors is aimed at enhancing long-term value for the company and its investors.
In conclusion, IOCL’s gradual shift from a fuel-centric model toward a more diversified energy and services portfolio reflects a balanced and forward-looking strategy rather than a sudden departure from its core strengths. Although the benefits of this transformation may take time to fully materialize, IOCL’s focus on disciplined execution, profitability, and long-term sustainability suggests it is laying a stable foundation for future growth in a changing energy landscape.
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