Indian Oil stock: why ICICI Securities says it’s still a buy despite margin pressures

Indian Oil Corporation Limited (NSE: IOC, BSE: 530965) continues to remain firmly on the “Buy” radar of ICICI Securities. The brokerage reaffirmed its positive stance with a revised price target of ₹180, underpinned by a belief that the refining and marketing giant’s current share price significantly underrepresents its medium-term earnings potential. The recommendation comes despite near-term volatility in gross refining margins and crude oil prices that have weighed on quarterly results, reflecting confidence in the structural strength of Indian Oil Corporation’s integrated operations and balance sheet resilience.

Why did ICICI Securities maintain its ‘Buy’ rating on Indian Oil shares despite volatile margins?

ICICI Securities has taken the view that Indian Oil Corporation’s fundamentals remain intact and valuation comfort is too compelling to ignore. With the stock trading near ₹146, the brokerage sees meaningful headroom for appreciation toward its upgraded target price of ₹180, which has been rolled forward to FY28 earnings estimates. This reflects confidence that the company’s long-standing market leadership in refining, distribution, and petrochemicals gives it both operating leverage and a strategic role in India’s energy security.

The firm stressed that Indian Oil Corporation continues to trade at a discount to both its historical average and peer companies such as Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited. Its wide distribution footprint of more than 36,000 fuel stations and refining capacity of over 80 million tonnes per annum position it to capture stable demand growth, even if refining spreads remain volatile in the short term.

How did Indian Oil’s latest quarterly results shape investor sentiment?

For the quarter ended June 30, 2025, Indian Oil Corporation reported net profit of ₹56.89 billion, more than double the figure from the same quarter last year. Yet the results disappointed analysts because they fell short of consensus expectations, largely due to inventory losses and a sharp decline in gross refining margins, which dropped from $6.39 per barrel to $2.15 per barrel. Revenue growth remained flat and sales volumes held steady, but profitability took a hit as crude price dynamics turned unfavorable.

While the earnings miss triggered cautious short-term sentiment, ICICI Securities emphasized that the weakness was cyclical rather than structural. The brokerage expects refining margins to gradually recover in subsequent quarters, supported by steady consumption growth in India and moderating global supply additions. However, it flagged that Brent crude trading in the $78 to $90 per barrel range continues to present headwinds and may keep near-term earnings volatile.

What role does valuation comfort play in this bullish stance?

Valuation has emerged as the strongest support for ICICI Securities’ “Buy” call. At its current trading levels, Indian Oil Corporation is valued at a forward price-to-earnings ratio of around 5.7 times projected FY26 earnings, compared with a sector average close to 8 times. This provides a significant cushion against downside risks. The company also offers a dividend yield of about 5 percent, reinforcing its appeal for income-seeking investors in an uncertain market.

The brokerage also highlighted that Indian Oil Corporation has kept its debt-to-equity levels manageable and recently undertaken deleveraging steps that have improved financial flexibility. Capital allocation toward renewable energy, biofuels, and petrochemicals gives the company optionality for earnings diversification, making it less reliant on cyclical refining margins over the longer term.

How does Indian Oil compare with its oil marketing peers?

Among India’s state-owned oil marketing companies, Indian Oil Corporation has the largest refining footprint and the most extensive retail distribution network. While this scale advantage brings resilience and pricing power, it also exposes IOC to higher inventory risks during periods of crude volatility.

Bharat Petroleum and Hindustan Petroleum shares have recently enjoyed stronger short-term momentum, partly due to divestment speculation and corporate actions. Yet Indian Oil’s integrated operations across refining, marketing, pipelines, and petrochemicals are seen by ICICI Securities as a unique strength that justifies its premium outlook. The brokerage believes IOC’s diversified model offers investors longer-term stability compared with peers that are more narrowly focused.

What does institutional and retail sentiment suggest about IOC’s stock positioning?

Recent shareholding data indicates a shift in positioning. Foreign Institutional Investors (FIIs) have trimmed stakes in Indian Oil Corporation, reflecting caution over volatile refining margins and global crude uncertainties. By contrast, Domestic Institutional Investors (DIIs), including large mutual funds and Life Insurance Corporation of India, have increased their holdings. This divergence suggests that while international investors are trading short-term risks, domestic institutions remain confident in Indian Oil Corporation’s long-term compounding potential.

Retail investors also remain moderately bullish. Indian Oil consistently ranks among the most traded public sector undertakings on the National Stock Exchange, supported by retail interest in dividend-yielding energy stocks. Sentiment on investor forums points to a split: long-term value investors highlight the attractive valuation and strong yield, while momentum traders remain wary of volatility.

What historical context explains Indian Oil’s position in India’s energy system?

Indian Oil Corporation has been central to India’s energy infrastructure since its inception in 1959. Over decades, the company has scaled up refining capacity to more than 80 million tonnes per year and established dominance across the petroleum value chain. It has navigated multiple industry cycles, from the commodity supercycle margins of the mid-2000s to the severe downturns during the 2008 financial crisis and the 2020 pandemic.

Each time, IOC’s integrated business model and government backing allowed it to absorb shocks and rebound. Today, as the energy transition accelerates, the company is repositioning itself by investing in hydrogen production, electric vehicle charging networks, and advanced biofuels. These diversification moves are increasingly central to investor assessments of its long-term value.

What risks could challenge ICICI Securities’ optimistic view?

Despite its strong fundamentals, Indian Oil Corporation remains exposed to material risks. Crude oil price volatility is the foremost concern. A sharp spike in global oil prices would compress marketing margins, particularly if the government restricts fuel price pass-throughs for political or regulatory reasons. Inventory losses, which have already weighed on the latest quarterly earnings, also remain a recurring risk.

Policy interventions in the form of fuel price controls or subsidy mechanisms can distort earnings visibility. Global demand slowdowns, currency fluctuations, and execution delays in renewable projects could further challenge the diversification narrative that underpins ICICI Securities’ longer-term confidence.

How does broader analyst consensus align with ICICI Securities’ stance?

Consensus data shows that a majority of analysts maintain a “Buy” recommendation on Indian Oil Corporation. Price targets range between ₹155 and ₹195, with the median target around ₹160, implying moderate upside from current levels. ICICI Securities’ revised target of ₹180 is on the higher side of the spectrum, reflecting stronger conviction in medium-term growth.

Investor forums reveal that while value investors are attracted by dividends and valuations, short-term traders remain unconvinced by the volatility in refining margins. The overall tone in institutional reports is constructive but tempered by recognition of crude price risks.

What is the outlook for Indian Oil shares in FY26 and beyond?

ICICI Securities projects earnings growth for Indian Oil Corporation at around 11 to 12 percent CAGR through FY28. This growth is expected to be driven by consistent demand for transportation fuels, expansion in petrochemicals, and operational efficiencies. Revenue growth is likely to remain modest at around one to two percent per annum, but profitability should strengthen if refining margins stabilize at $5 to $6 per barrel.

Management guidance points to increased capital expenditure in renewable energy and petrochemicals, aligning with India’s hydrogen economy roadmap and LNG infrastructure expansion. These investments position IOC to remain relevant as the energy transition gathers pace. If refining margins recover and crude oil prices stabilize in the $75 to $85 band, Indian Oil could deliver the double-digit upside that ICICI Securities anticipates.

Is Indian Oil a buy, sell, or hold at current levels?

Based on ICICI Securities’ note and the broader consensus, Indian Oil Corporation appears best suited as a “Buy on dips” opportunity. Its low valuation and attractive dividend yield provide downside protection, while its integrated business model and government backing ensure relevance. For long-term investors, the stock fits well as a core public sector energy holding balancing income and growth.

For traders and short-term investors, volatility in crude prices and refining margins means patience will be required. However, institutional flows indicate that domestic investors are positioning for stability, and analyst targets point toward upside in the range of 10 to 20 percent. ICICI Securities’ reaffirmed “Buy” call strengthens the case for including Indian Oil Corporation in a diversified portfolio.