Indian Oil Corporation Stock Analysis: 52-Week Low and It Remains a Quality Stock
Business and Industry Overview:
Indian Oil Corporation Limited is the leading oil and gas-producing PSU in India. The company is under the ownership of the government of India and the Ministry of Petroleum & Natural Gas. It is the largest in terms of both capacity and revenue, with a refining capacity of 80.55 MMTPA. IOCL offers a diverse range of products that include oil, gas, petrochemicals, and alternative energy sources. It has over 37500 fuel stations across the country. The company is well-known for its advanced technologies and innovative research and development in the petrochemical industry. It was ranked 116th on Fortune’s 2022 Global 500 list of the world’s largest corporations. It has maintained its leadership in the ‘BW Top 500’ for the third consecutive year and has been recognized as the most respected oil and gas company by Business World. The company aims at achieving net zero emissions by 2046. It is pioneering green initiatives, including Hydrogen Mobility, hydrogen Transportation, Biofuels, Electric Mobility, Solar Cooktop,s and Minimising Water footprints, which are central to our strategic vision for a cleaner energy future.
With India targeting to achieve a $5 trillion economy by 2025–26, there is a huge surge in the petrochemical industry to fulfil the demand of the growing economy. Petrochemicals would fuel various industries that will contribute to the growth of the economy, such as agriculture, automotive, packaging, construction, manufacturing, and many more. Hence, this industry cannot be ignored, and the petrochemical demand is expected to reach $1 trillion by 2040. Recently, the Government of India has taken various initiatives, including 100% FDI through automatic routes, establishing Petroleum, Chemicals, and Petrochemicals Investment Regions (PCPIRs). It is also setting up infrastructure like 10-plus plastic parks which are to be executed between 2020 and 2035. IOC being one of the leading petrochemical producer companies in India, has a 42% market share in petroleum Oil and lubricants with over 60,900 touch points. It owns 11 refineries across India. It also has its subsidiary functioning across India like IndianOil (Mauritius) Limited, Lanka IOCPLC in Sri Lanka, 10C Middle East FZE , 10C Sweden AB , IOCL (USA) Inc. are few of them.
Latest Stock News:
ADNOC Gas (Abu Dhabi National Oil Company), a natural gas producer based in Abu Dhabi, UAE, has signed a long-term sales and purchase agreement (SPA) with Indian Oil Corporation Ltd. to supply liquefied natural gas (LNG) for 14 years. This agreement is valued between $7 billion and $9 billion and will commence in 2026, providing IndianOil with up to 1.2 million metric tonnes of LNG annually. The agreement supports India’s objective of increasing the share of gas in its energy mix to 15% by 2030 and demonstrates ADNOC Gas’s commitment to lower-carbon energy solutions. The LNG will be sourced from ADNOC Gas’s Das Island facility, which has a production capacity of 6 million metric tonnes per year and a proven track record of reliability.
This deal is part of ADNOC Gas’s strategy to secure long-term contracts in growing Asian markets, diversifying sources beyond traditional suppliers like Qatar and Russia, and thereby strengthening India’s energy security. Additionally, the agreement reinforces India’s strategic partnership with the UAE, a key supplier of crude oil, and opens up opportunities for further investments in refining, petrochemicals, and renewable energy.
Indian Oil Corporation is trading -0.64% lower at Rs 116.50 as compared to its last closing price. Indian Oil Corporation has been trading in the price range of 117.55 & 114.35. Indian Oil Corporation has given -14.05% in this year & -6.28% in the last 5 days. Indian Oil Corporation has TTM P/E ratio 17.67 as compared to the sector P/E of 8.97.
Potentials:
The Indian government is actively working to increase the share of natural gas in the country’s energy mix from 6% to 15% by 2030 as part of its clean energy transition. Aligning with this vision, Indian Oil Corporation (IOCL) has signed a 14-year sales and purchase agreement with ADNOC Gas to import liquefied natural gas (LNG), ensuring a stable and long-term supply to meet rising domestic demand. From a valuation perspective, IOCL’s stock is currently trading at 0.90 times its book value, indicating it is relatively undervalued compared to its intrinsic worth. The company also offers an attractive dividend yield of 10.2%, making it appealing to income-focused investors. Over the past five years, IOCL has demonstrated strong profit growth, delivering a CAGR of 19.1%, reflecting its operational efficiency and strategic expansion. Additionally, the company has maintained a healthy dividend payout ratio of 42.6%, ensuring consistent returns for its shareholders while balancing reinvestment in growth initiatives.
Analyst Insights:
On Monday, Indian Oil Corporation announced a 76.57% decline in its consolidated net profit, totalling Rs 2,115 crore for the third quarter (Q3) of the financial year 2024-25 (FY25), down from Rs 9,029.56 crore for the same period last year. The significant decrease in profits was attributed to diminished refining margins and increased expenses during the quarter. The Consolidated operational revenue saw a slight dip of 5% to Rs 2,15,522 crore, compared to Rs 2,26,892 crore reported in the same quarter a year earlier.
Expenses remained largely unchanged at Rs 2.19 trillion, up slightly from Rs 2.17 trillion. However, compared to the previous quarter, expenses increased by 8.4% from Rs 2.02 trillion. The market capitalization of Indian Oil is ₹ 1,64,654 Cr, with a stock P/E of 17.0 and ROCE of 21.1%.
With the volatility in the oil and gas industry, the investors should hold the security for now and keep an eye on the changing market as there is a drop in the profit margin and since this industry is cyclical. The P/E ratio is 17 compared to the industry which is 18.95 and the ROCE is 21.1 which means that the comapy can generate good return on the capital employed.